3. The reorder point [see equation (10.6)] is defined as the lead-time demand fo
ID: 363395 • Letter: 3
Question
3. The reorder point [see equation (10.6)] is defined as the lead-time demand for an item In cases of long lead times, the lead-time demand and thus the reorder point may exceed the economie order quantity . In such cases, the inventory position will not equal the inventory on hand when an order is placed, and the reorder point may be expressed in terms of either the inventory position or the inventory on hand. Consider the economic order quantity model with D = 5000, C.-532, Ch = S2, and 250 working days per year. Identify the reorder point in terms of the inventory position and in terms of the inventory on hand for each of the following lead times: . 5 days b. 15 days 25 days d. 45 days For A. B. C. since r is less than or equal to Q* both inventory posistion and inventory on hand equal? D. 1. Inventory reorder point? 2. One order of Q* Outstanding? 3. The on hand reroder point r-Q*Explanation / Answer
The given values that we have from the questions are:
Annual Demand (D) = 5000 per year
Working Days = 250 days per year
Therefore, Demand per day (d) = Annual Demand / Working days
= 5000 / 250 = 20 per day
Now, we know that R = D x M
where, R = Reorder point, D = Demand per day, M = Lead time for new order in days
Therefore, Reorder point for each of the given lead time is calculated as:
a) For 5 days:
R = D x M
R = 20 x 5 = 100
Reorder point for 5 days is 100
b) For 15 days:
R = D x M
R = 20 x 15 = 300
Reorder point for 15 days is 300
c) For 25 days:
R = D x M
R = 20 x 25 = 500
Reorder point for 25 days is 500
d) For 45 days:
R = D x M
R = 20 x 45 = 900
Reorder point for 45 days is 900
Also, Given Annual demand (D) = 5000 per year
Therefore, Value of Q* = 2DCo/Ch
Q* = (2 * 5000 * 32/2) = 400
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