You must do the necessary calculations in the answer cells. Simply providing a n

Question

You must do the necessary calculations in the answer cells. Simply providing a number in the answer cell will not receive any credit.

Part 1: Enter the requested information into the green cells. Round off to 1 decimal point.

The online Collegiate Products Store gathered the following information regarding UND sweatshirts:

2017

Annual Demand 1200

Cost per hoodie 14.5

Carrying Cost per sweatshirt per year as a percentage of the cost of a sweatshirt                    30%

Cost per order placed $25

Lead time in months 1

Standard Deviation of Demand during lead time 23

Desired Service Level should be at least 90.30%

Question 1: If you don't use safety stock, you should place an order when the inventory position reaches what amount?

Question 2: If you do use safety stock, how many sweatshirts should be added to Re-order Point (Give amount of safety stock only)?

Question 3: When the reorder point is reached, how much sweatshirts should be ordered?

Part 2: Enter the requested information into the yellow cells. Round off to 1 decimal point (Use the data given below for questions referring to Part 2)

EOQ 240 units

Daily Demand 240 units per day

Lead time in days 240 days

Desired service level should be at least 240

(note: Look up z-value in table)

Standard Deviation of Demand during lead time and review period 240 see note below

(note this is not the daily sd of demand, but the sd over the entire

review period + lead time)

Inventory Position 212 units in stock

Part 2,

Question 1: What is the optimal review period? ____________days.

Part 2, Question 2: What is the target Inventory level? _____________ units.

Part 2, Question 3: How much should ordered? _____________units.

*Answer everything past Part 2*

Explanation / Answer

PLEASE FIND BELOW ANSWER TO FIRST QUESTION I.E PART I :

Answer to Part 1:

Q.1 :   If we don’t use safety stock, we should place an order at a level of

            = Average monthly demand x Lead time ( in months )

            =   1200 / 12 x 1

             = 100

We should place an order when inventory position reaches at a level of 100

Q.2 :        Z value for service level of 90.30% = NORMSINV ( 0.9030 ) = 1.2988

Standard deviation of demand during lead time = Sd = 23

Therefore,

Safety stock = Z value x Standard deviation of demand during lead time = 1.2988 x 23 = 29.87 ( 29.9 rounded to 1 decimal place )

Number of sweatshirts to be added to reorder point = 29.9

Q3.: When reorder point is reached, the amount should be ordered will be equal to EOQ ( Economic Order Quantity )

Following re the relevant details :

Annual demand = D = 1200

Cost per order = Co = $25

Unit inventory carrying cost = Ch = 30% of $14.5 = $4.35

Economic order quantity ( EOQ )

= Square root ( 2 x Co x D/Ch )

= square root ( 2 x 25 x 1200/4.35)

= 117.44 ( 117.4 rounded to 1 decimal place )

When reorder point is reached, amount of sweatshirts to be ordered = 117.4

We should place an order when inventory position reaches at a level of 100

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