Shipments of Product X from a plant to a wholesaler are made in lots of 600. The

Question

Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. Lead time from plant to wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant. Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 550 units?

a

plant shipment lot size of 400 and

plantminustominuswholesaler

lead time of 3 weeks

B.

plant shipment lot size of 400 and

plantminustominuswholesaler

lead time of 2 weeks

C.

plant shipment lot size of 600 and

plantminustominuswholesaler

lead time of 4 weeks

D.

plant shipment lot size of 500 and

plantminustominuswholesaler

lead time of 3 weeks

Explanation / Answer

The wholesaler's total cycle plus pipeline inventories amounting to 550 units.

for this situation D. is true.

That Is

plant shipment lot size of 500 and

plantminustominuswholesaler

lead time of 3 weeks.

Given wholesaler's average demand for X is 100 units per week.

Therefore 100 units average cycle inventory=lot size/2=500/2=250 pipeline.

Inventory = lead time *average demand=3*100=300

Thus the wholesaler's total cycle plus pipeline inventories = 250+300=550.

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