Pages File Edit INTRO AG HW 3 Estimating Economic Order Quantity and Reorder Poi
ID: 368474 • Letter: P
Question
Pages File Edit INTRO AG HW 3 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. C-15% per year R-1200 bags per year S $25 per order s-cost of placing an order P = price per unit C carrying cost percentage Q inventory quantity R = annual use 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
(1)
Inventory Quantity that minimizes costs (Q) = sqrt((2*R*S)/(C*P))
Q = sqrt((2*1200*25)/(.15*50))
Q= 89.44 = 89 (rounding off)
(2)
Carrying costs = (q/2)*(50*.15) = $333.75
Ordering costs = (1200/89)*25 = $337.08
Total costs = 333.75+337.08 = $670.83
(3) Demand for 10 days = (1200/365)*10 = 32.867 --> 33(rounding off)
Therefore , re-order point is 33 units.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.