dit Ihsert Format ArrangeView Share Window Help INTRO AG HW 3-Edited Estimating
ID: 368431 • Letter: D
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dit Ihsert Format ArrangeView Share Window Help INTRO AG HW 3-Edited Estimating Economic Order Quantity and Reorder Point In order the produce beer, RBC requires several inputs including malted barley. RBC needs enough malted barley in stock to be able to quickly respond to demand, but RBC has limited storage space and must sacrifice valuable service area in order to store a large quantity of barley. Complicating the situation further is the high shipping costs associated with waiting until the last minute to order relatively smaller quantities of malted barley. Use the following information to solve for the Economic Order Quantity and the Reorder Point for RBC. P price per unit C - carrying cost percentage Q-inventory quantity R annual use C-15% per year Rs 1200 bags per year S $25 per order S = cost of placing an order P = $50 per bag 1. What is the inventory quantity that will minimize total inventory cost? Round to the nearest whole number 2. What are the Carrying Costs (CC), Ordering Costs (OC), and Total Cost (TC) at the inventory quantity estimated in (1)? 3. If it takes 10 days for RBC to receive an order of malted barley, what is the Reorder Point (ROP)? Round to the nearest whole number.Explanation / Answer
R Annual Demand 1200 Units S Ordering cost 25 $ C Carrying cost % 15% h=C*P Holding cost/unit 7.5 $ P Cost per unit 50 $ W Working days 250 days d Daily demand (D/W) 4.8 Q Economic lot size 89 Units Optimal Prod quantity Ans 1 Sqtr((2*Annual Demand*order cost)/Annual inventory carrying cost) (sqrt(2*KD/h) Avg S Avg Stock (Q/2) 44.72135955 45 Avg Stock N Optimal no of orders 13.41640786 (Demand/EOQ) 13 No of Orders DBO Days between order (Days/N) 18.63389981 18.63 Days Cycle time TC Total cost ((KD/Q)+(hQ/2)) 670.82 $ Total cost Ans 2 OC Ordering cost (KD/Q) 335.41 $ CC Holding cost (hQ/2)) 335.41 $ PC Production cost (P*D) 60000.00 $ GTC 60670.82 $ LT Lead time 10.00 days ROP ROP = LT*Daily demand 48 Units Ans 3
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