HW 8 Inventory Management (due 18 April) please do not forget the EOQ for QUESTI
ID: 332562 • Letter: H
Question
HW 8 Inventory Management (due 18 April)
please do not forget the EOQ for QUESTION #8
What are the 4 questions of inventory management?
Which one of these questions is not in most textbooks?
If a company is working under a certain lead time schedule what is the reorder point for the following information?
Lead Time = 8 hours
Demand = 52 per hour
When would a company consider adding safety stock to their inventory levels?
Why would a company use inventory to cover up inefficiencies in their supply chains?
Given the following information, calculate the EOQ:
Annual demand = 4,000,000
Cost or ordering = $54
Carrying costs = 35%
Using the information in #6 what is the number of annual orders?
If the company in #7 uses exponential smoothing (smoothing factor = .7) and the forecast for the year is the figure they use for EOQ calculations, calculate the EOQ using the following information:
The cost of ordering and carrying cost % are the same as #6
Forecast the 2017 demand using exponential smoothing and then use the 2017 forecast as the annual demand, calculate the EOQ for 2017
year
sales
2014
1,000,000
2015
1,200,000
2016
3,000,000
2017
Which question of inventory management does the Reorder Point answer?
year
sales
2014
1,000,000
2015
1,200,000
2016
3,000,000
2017
Explanation / Answer
Considering the forecast for 2014 same as sales
Forecast using Exponential smoothing is calculated by the formula Ft = Ft-1 + (At-1 - Ft-1)*a, where a is smoothing constant
Forecast for year 2015 = 1000000 + (1000000 - 1000000)*0.7 = 1000000
Forecast for year 2016 = 1000000 + (1200000 - 1000000)*0.7 = 1140000
Forecast for year 2017 = 1140000 + (3000000 - 1140000)*0.7 = 2442000
Annual demand, D = 2,442,000
Cost of ordering, S = $54
Carrying costs, H = 35% = 0.35 (for cost per unit = $ 1)
EOQ = SQRT(2DS/H) = SQRT(2*2442000*54/0.35) = 27,451
Reorder point answer that question about when to place the order. Reorder point gives the inventory level, which acts as the trigger point for reordering. In other words, in a continuous review system, a new order is placed, when the inventory level reaches the level of reorder point.
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