Home work 3

Q 1) Determination of inventory control system ?

Solution:
a) Inventory control system for Tegdiws
Reorder point = (demand rate per period * lead time) + safety stock
=(1000/52)(4)+55
=824.23 units
Reorder quantity (Q*) =sqrt (2DS/H)
=sqrt (2*1000*150/.20*10)
=1224.74 units
b) Inventory control for widgets
Let I be the current (on-hand) inventory. Since it is not given, assume it to be zero
Q* = d(T + L) + ss I = (5000/52)(3+1) + 5 0 = 390
Therefore the current inventory system for widgets is to order 390, based on
current inventory. (Reorder point Every Three Weeks! When the supplier drops by)

Q 2) Reorder point calculation

a)

Economic order quantity = (2*annual demand*order cost/annual carrying

cost)^1/2
annual demand = 500
order cost = $100
annual carrying cost or holding cost = 20% of product cost = 0.20*500 =
100
economic order quantity = (2*500*100/100)^1/2 = 1000^1/2 = 31.62 or
32 refrigerators (rounded off).
b)

Standard division during lead time () = 10 refrigerators

The z value corresponding to 97 % is =1.90
Reorder point (R) = (demand rate * Lead time ) +z
= (500/365) (7) + (1.90) * 10 = 9.59 + 19 = 28.59 or 29
refrigerators

Q 3)

a)

The

number

of

pies

Kroger

should

make

=(0*0.10)+(5*0.15)+(10*0.25)+(15*0.10)+(20*0.25)+(25*0.05)+(30*0.05)+
(35*0.05)
=14.25 or 15 units

b)
average under stock = (20*0.25)+(25*0.05)+(30*0.05)+(35*0.05)
=9.5
Average over stock =(0*0.10)+(5*0.15)+(10*0.25)
=3.25