Shipments of Product X from a plant to a wholesaler are made in lots of 600. The
ID: 459848 • Letter: S
Question
Shipments of Product X from a plant to a wholesaler are made in lots of 600. The? wholesaler's average demand for X is 100 units per week. Lead time from plant to wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant.
Which of the following situations results in the? wholesaler's total cycle plus pipeline inventories amounting to 550? units?
A.
plant shipment lot size of 400 and
plantminus
tominus
wholesaler
lead time of 2 weeks
B.
plant shipment lot size of 500 and
plantminus
tominus
wholesaler
lead time of 3 weeks
C.
plant shipment lot size of 400 and
plantminus
tominus
wholesaler
lead time of 3 weeks
D.
plant shipment lot size of 600 and
tominus
wholesaler
lead time of 4 weeks
Explanation / Answer
Demand rate = 100 units per week
Option A:
Lot Size = 400
Lead time = 2 weeks
Pipeline Inventory = Demand rate per period * Lead time
= 100 * 2 = 200
Cycle Inventory = Lot size/2
= 400/2 = 200
wholesaler's total cycle plus pipeline inventories = 200 + 200
= 400
Option B:
Lot Size = 500
Lead time = 3 weeks
Pipeline Inventory = Demand rate per period * Lead time
= 100 * 3 = 300
Cycle Inventory = Lot size/2
= 500/2 = 250
wholesaler's total cycle plus pipeline inventories = 300 + 250
= 550
Option C:
Lot Size = 400
Lead time = 3 weeks
Pipeline Inventory = Demand rate per period * Lead time
= 100 * 3 = 300
Cycle Inventory = Lot size/2
= 400/2 = 200
wholesaler's total cycle plus pipeline inventories = 300 + 200
= 500
Option D:
Lot Size = 600
Lead time = 4 weeks
Pipeline Inventory = Demand rate per period * Lead time
= 100 * 4 = 400
Cycle Inventory = Lot size/2
= 600/2 = 300
wholesaler's total cycle plus pipeline inventories = 400 + 300
= 700
Thus, answer is Option B
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