The answer is 1,110 just need to know how they got there. Please be as descripti
ID: 2748372 • Letter: T
Question
The answer is 1,110 just need to know how they got there. Please be as descriptive as possible- thanks!
The gross requirements for item A are specified for weeks 1 through 12 in the table that follows. Question 5 Incorrect 0.00 points out of ltem A, Level 0 01|02|03|04|05|06| 01 02 03 04 05 06 07 08 09 10 11 12 2.00 0 60 0 50 0 70 0 40 0 60 0 50 Gross requirements. Projected on hand Planned order release The lead time is 2 weeks; current on hand inventory is 70 units; the order cost is $200 per order; and, the inventory cost is $1 per unit per week. The quantity ordered, when it is necessary to place an order, is a multiple of 50 units (i.e. 50, or 100, or 150,...). What is the total cost for the 12 week period? Assume that inventory is requisitioned at the beginning of the period Flag question 70 7 7 ? Answer: 2500 The correct answer is: 1110Explanation / Answer
Planning is mostly only intuition, so explanation would be a bit difficult, especially a written one.
I will try to explain as much as possible to elaborate.
Let’s concentrate on week by week to understand logic.
Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
Item A
Gross requirements
0
60
0
50
0
70
0
40
0
60
0
50
OH = 0
Scheduled receipts
0
0
50
0
100
0
0
0
100
0
50
LT = 2
Opening Inventory
70
70
10
10
10
10
40
40
0
0
40
40
40
SS = 0
Closing Inventory
70
70
10
10
10
10
40
40
0
0
40
40
40
Q = 50
Planned order releases
50
0
100
0
0
0
100
0
50
0
0
Week 1: Gross requirement is 0. Hence no planning required.
Week 2: Gross requirement is 60 and we have in hand inventory, ie, opening inventory of 70 units. This is enough for satisfying week 2 demand. Hence, we don’t place any orders in advance. When we come to week 2, assuming the demand is fulfilled in the beginning of the week itself, the inventory left out would be 70-60 = 10 units. So we have to hold this inventory for the weeks’ time which would cost us 10 * $1 = $10.
Week 3: We do not have any requirement in week 3 so no planning required. But the opening inventory is 10 units which is carry forwarded from week 2 closing inventory. We have to hold this inventory also for one more week which would cost us another 10$.
Week 4: we need 50 units here, but we only have 10. Means we have to place an order in week 2 for 50 units (as lead time is 2 weeks and we can only place orders in multiples of 50). We order only 50 in order to minimize inventory holding cost. This order will be received by us in week4 for us to supply for 50 units demand. Hence, the closing balance here is (Receipts + Opening Inventory – Gross requirements) = 50+10-50 = 10 units. The holding cost here again is $10.
Week 5: Same as week 3. No requirement and hence no planning. But we have to hold inventory for a week.
Week 6: Requirement is 70 but we only have 10 units. We have to place 100 units in week 4 so that we can receive the stock in week 6 to supply for this demand. Closing stock here is 100+10-60 = 40.
We continue the same steps to further weeks and the table is filled as shown above.
Now, for total cost = Total cost of holding inventory + Ordering cost
Total cost of holding inventory is sum of holding cost at each week. Here it is 70+10+10+10+10+40+40+0+0+40+40+40 = $ 310
No. of orders placed = 4 times (weeks 2,4,8,10)
Ordering Cost = No. of orders placed * 200 = 4 *200 = $ 800
Total cost = 310 + 810 = $ 1100
Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
Item A
Gross requirements
0
60
0
50
0
70
0
40
0
60
0
50
OH = 0
Scheduled receipts
0
0
50
0
100
0
0
0
100
0
50
LT = 2
Opening Inventory
70
70
10
10
10
10
40
40
0
0
40
40
40
SS = 0
Closing Inventory
70
70
10
10
10
10
40
40
0
0
40
40
40
Q = 50
Planned order releases
50
0
100
0
0
0
100
0
50
0
0
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