Question

Your factory manufactures tricycles. You need to purchase front wheels from the supplier. The expected annual demand is D units; the setup or ordering cost is $Sper order; and the holding cost per unit per year is $H. Based on the number given in the table below:

a.Determine optimal number of wheels to order

b.Determine the reorder point (ROP) (without safety stock)assuming that the average lead time is Ldays, and your factory works 250 days a year.

c.Based on your answer in (b), determine the reorder point (ROP) (with safety stock)assuming that the standard deviation of daily demand is σdand acceptable service level is 95%. (Z for 95% service level in 1.65)

D= 1700

H= 0.9

S= 7

L= 4

σd= 1.33

Answer 1

Answer:

factory manufactures tricycles. we need to purchase front wheels form the supplier

Given

Annual Demand D= 1700 Units

Holding Cost H= 0.9

setup or Ordering cost is S= 7

Lead Time L= 4 days

σd= 1.33

a)

Optimal number of wheels to order

Economic Order Quantity (Q) =

b)

Lead time (L) = 4 days, σd= 1.33

Now, Reorder Point (ROP) =   

c)

95% service level Z = 1.65

based on Answer B

Now, Reorder Point (ROP) =

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