17. Jill\'s Job Shop buys two parts (Tegdiws and Widgets) for use in its product
ID: 334110 • Letter: 1
Question
17. Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every three weeks. Data for both products are as follows: (Answers in Appendix D) Tegdiw 10,000 20% $150.00 Item Widget 5,000 20% $25.00 1 week Annual demand Holding cost (% of item cost) Setup or order cost Lead time 4 weeks Safety stock 55 units 5 units Item cost $10.00 $2.00 a. What is the inventory control system for Tegdiws? That is, what is the reorder quantity and what is the reorder point? b. What is the inventory control system for Widgets?Explanation / Answer
Inventory control system for Tegdiws
Q*= square root of (2DS/H)
Where D is demand, S is setup cost; H is holding cost (.20*10)
=square root of (2*10000*150/ .20*10)
= square root of (3000000/2)
= square root of (1500000)
=1224.74
=1225 units
Thus, the reorder point is R= dL+SS
d (weekly demand )= 10000/52 = 192.30
L is lead time for Tegdiws= 4 weeks
Ss is safety stock= 55 units
So Reorder point R is = (192.30 * 4)+ 55
=824.2
=825 units
(B) Inventory control system for widgets
Q*= square root of (2DS/H)
Where D is demand, S is setup cost; H is holding cost (.20*2)
=square root of (2*5000*25/ .20*2)
= square root of (250000/0.4)
= square root of (625000)
=790.56
=791 units
Thus, the reorder point is R= dL+SS
d (weekly demand )= 5000/52 = 96.15
L is lead time for Tegdiws= 1 weeks
Ss is safety stock= 5 units
So Reorder point R is = (96.15 *1)+ 5
=101.15
=102 units
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