Tiger Hat Inc. CTHI) is a famous company making hats with tiger paw. Recause TVW

Question

Tiger Hat Inc. CTHI) is a famous company making hats with tiger paw. Recause TVW wants to w the optimal cost, they hire you to calculate the value using EOO model. According to the recod, T d the average daily demand is 90 units (daily standard deviation is 5 hats) Right now they work 200 days year, and they have an ordering cost and a holding cost at $20 per order and SA per unit per ye respectively. Their suppliers usually need 5 days to ship the order. Using this information please anww the questions 43 to 47. 43. What is the optimal ordering quantity? A) 100 B) 200 C) 300 D) 400 E) 500 44. What is the annual holding cost according to the optimal order quantity? A) 1100 B) 1200 C) 1300 D) 1400 E) 1500

Explanation / Answer

The answers and calculations are given below

43. EOQ = 300

44. Annual Holding Cost = 1200

45. Cost Reduction = 5.71 (=2405.71 - 2400)

46. Safety Stock = 14.33

47. Reorder Point = 464.33

     EOQ Q = 280 Daily Demand, µD µD = 90 Standard Deviation of Daily Demand, D D = 5 Working days per year, Y Y = 200 Daily Demand, D = Y*µD D = Y*µD 18000 18000 Ordering Cost (O) O = 20 20 Annual Holding Cost (H) H = 8 8 Lot Size / Optimal Order Qty (Q) Q = (2*D*O/H) 300.00 280.00 Cycle Stock , cs = Q/2 cs = Q/2 150 140 Number of Orders per year (N) = 60.0 64.3 Annual Ordering Cost (AOC) = O*N AOC = O*N 1,200.00 1,285.71 Annual Holding Cost (AHC) = cs*H AHC = cs*H 1,200.00 1,120.00 Total Inventory mgmt Cost = AOC + AHC TC = AOC + AHC 2,400.00 2,405.71 Lead Time (days) (L) L = 5 Service level SL = 90% Z-value Z = 1.28 Safety stock (ss) ss = ZDL 14.33 Reorder Point (ROP) - Fixed (as given) ROP = µD*L + ss 464.33

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