What is the safety stock level for the figurines at 95 percent service level (ro
ID: 359871 • Letter: W
Question
What is the safety stock level for the figurines at 95 percent service level (round up)? _____________
Over how many working days will each order (EOQ) last (round up)? ___________
Michigan State Figurine Inc. (MSF) sells crystal figurines to Spartan fans. MSF buys the figurines from a manufacturer at $10 per unit. They send orders electronically to the manufacturer, costing $20 per order and they experience a lead time of 8 days for each order to arrive from the manufacturer. Their inventory carrying cost is 20%. The average daily demand of the figurines is 20 units per day with a standard deviation of 3 units. They are open for business 250 days a year 1. The company is ope n 250 days per year r. What is the annual demand for the figurines? 2. If the current ordering policy of MSF is to order once every three months, how large is the order 3. 4. 5. size (Q)? If MSF orders at the EOQ, how many units should be ordered each time? At the EOQ, about how many orders (round up) will MSF place each year? Refer to the graph in question #36. Which of the following represents the EOQ you computed in #34? b. B d. D g. None of the above 8. Refer to the graph below. Which of the following represents the average daily demand for the figurines? 9 A b. C c. D d. E f. None of the aboveExplanation / Answer
Daily demand (d) = 20 units
Ordering cost (S) = $20
Cost = $10 per unit
Holding cost (H) = 20% of cost = 20% of $10 = $2
1)If the company opens 250 days per year
Annual demand = d x number of operating days in a year
= 20 x 250
= 5000 units
2) currently policy is to order once in every three months
So number of orders per year = 12 months / 3 = 4
Order size = D/Number of orders per year
= 5000 / 4
= 1250 units
3) Economic order quantity = sqrt of (2DS / H)
= sqrt of [(2 x 5000 x 20) / 2]
= 316 units
If MSF orders at the EOQ, it should order 316 units per order
4) If EOQ is used,
number of orders per year = D/EOQ = 5000/316 = 15.8 or rounded to 16 times
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