A product used in wound care by a home health care agency costs $12 to order.The
ID: 3064836 • Letter: A
Question
A product used in wound care by a home health care agency costs $12 to order.The monthly holding cost per item 0.25 and monthly demand is two thousand units.The lead time is two months and the purchase is $24. a) What is the economic order quantity for this product b) What is the length of order cycle? c) Calculate the total monthly costs. d) What is the reorder point if four hundred units of safety stock are kept? e)What is the investment cost for this product? f) The home health care agency is considering switching to a different supplier that can provide a lead time of one month, but at a higher price of $28.Other things held constant,would you recommend the switch to this other supplier?Justify your answer. A product used in wound care by a home health care agency costs $12 to order.The monthly holding cost per item 0.25 and monthly demand is two thousand units.The lead time is two months and the purchase is $24. a) What is the economic order quantity for this product b) What is the length of order cycle? c) Calculate the total monthly costs. d) What is the reorder point if four hundred units of safety stock are kept? e)What is the investment cost for this product? f) The home health care agency is considering switching to a different supplier that can provide a lead time of one month, but at a higher price of $28.Other things held constant,would you recommend the switch to this other supplier?Justify your answer. a) What is the economic order quantity for this product b) What is the length of order cycle? c) Calculate the total monthly costs. d) What is the reorder point if four hundred units of safety stock are kept? e)What is the investment cost for this product? f) The home health care agency is considering switching to a different supplier that can provide a lead time of one month, but at a higher price of $28.Other things held constant,would you recommend the switch to this other supplier?Justify your answer.Explanation / Answer
a) Economic order quantity= sqrt(2*quantity*cost per order/holding cost)
=sqrt(2*2000*12/0.25) = sqrt(192000) = 438
d) reorder point= daily demand *lead time +safety stock
= 2000 * 2 + 400 = 4400
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