Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its S
ID: 456988 • Letter: L
Question
Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 18 comma 70018,700 units per year. It costs Leaky Pipe $7575 to process an order to replenish stock and $5.005.00 per unit per year to carry the item in stock. Stock is received 1515 working days after an order is placed. No backordering is allowed. Assume 365365 working days a year.
a. Leaky Pipe's optimal order quantity is _ units. (Enter your response rounded to the nearest whole number.)
b. The optimal number of orders per year is _ orders. (Enter your response rounded to the nearest whole number.)
c. The optimal interval (in working days) between orders is _ days. (Enter your response rounded to one decimal place.)
d. The demand during lead time is _ units. (Enter your response rounded to the nearest whole number.)
e. The reorder point is _ units. (Enter your response rounded to the nearest whole number.)
f. The inventory position immediately after an order has been placed is _ units. (Enter your response rounded to the nearest whole number.)
Explanation / Answer
Annual Demand(D)=18,700 Price of Product(P)=11 Ordering Cost(O)=75 Holding Cost per unit=5 a) EOQ=sqrt(2*18700*75/5) 749.00 b) Optimal Order numbers=18700/749= 25.0 c) Optimal Interval=365/25= 15 d) demand during lead time=daily demand * lead time=18700/365*15= 768 e)Reorder Point=same as above=768 f) since 15 days is the lead time and 15 days also is the interval between orders hence inventory position will be same as reorder point=768
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