Problem 2 As an inventory manager, you must decide on the order quantity for an
ID: 372558 • Letter: P
Question
Problem 2 As an inventory manager, you must decide on the order quantity for an item. Its annual demand is 300 units. Ordering cost is $20 each time an order is placed, and the holding cost is 30 percent of the per-unit price. Your supplier provided the following price schedule. Price per Unit Order Quantity $6.00 $5.00 $4.00 000-149 150-199 200 and more What ordering-quantity policy do you recommend? Problem 3 Kyle store sells K2 skis. Th the ski season. Any skis left price of $150 per unit. The average demand for coming ski season is expe standard deviation of 25. How many K2 should Kyle store order? e store buys skis at $300 per unit, and sells them for $400 during unsold after the season ends will be put on sales at discount cted to be 400 with Problem 4 A company operating under a continuous review system has an average demand of per week for the item it produces. The standard deviation in weekly demand is 20 u lead-time for the item is six weeks, and it costs the company $30 to process each holding cost for each unit is $10 per year. The company operates 52 weeks per year 50 units nits. The order. The a. What is the economic order quantity (EOQ) for this item? c b. What are the desired safety stock level and reorder point if the company has e maintaining a 88% cycle-service level? c. What is the annual total cost for applying this system?Explanation / Answer
Answer to Problem 3:
This problem will be solved using Newsvendor model
Purchase cost for store = C = $300 / unit
Sale price for store = P = $400 / unit
Salvage price = S = $150 / unit
Therefore,
Cost of Underage = Cu = P – C = 400 – 300 = $100
Cost of overage = Co = C – S = 300 – 150 = $150
Hence , Critical ratio = Cu/ ( Cu + Co ) = 100/( 100 + 150)= 100/250 = 0.40
Critical ratio is the probability of demand = Order quantity at which cost is minimized
Thus probability = 0.40
Corresponding Z value for probability 0.40 = NORMSINV ( 0.40) = - 0.2533
Therefore optimum quantity to be ordered by store
= Average demand + Zvalue x Standard deviation of demand
= 400 - 0.2533 x 25
= 400 – 6.332
= 393.668 ( 394 rounded to nearest whole number )
KYLE SOTRE SHOULD ORDER 394 K2
KYLE SOTRE SHOULD ORDER 394 K2
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.