Question

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G H Part A In an office specialized 500 toners are used every year. Each toner costs $1500. Processing an order is an involved and time consuming process and it costs $500 to process each order. Storing toners requires a specialized facility and average holding costs are 580 per unit per year. Assume a lead time of one week and that there are 250 working days in a year. (18 Points) (Important: Show all steps of the suitable forecasting technique, Support your calculation with one lines of conclusion decision). a. What order quantity minimizes my total inventory costs? b. What is the average inventory held during the year? c. What is the time between orders? d. What is the reorder point? e. How many orders are placed in a year? (2 points) Part B Safety stock eliminates all stockouts. TRUE b. FALSE Ans:

Answer 1

Answers:

	Days per year=		250
	Annual demand, D=		500
	Order cost or setup cost, S		$500
	item cost		$1,500
	holding cost per year, H=		$80.00
	Lead time, LT	1 week	5 days
Answer a	Economic Order quantity, Q=	squareroot(2*S*D/H)	79.1
Answer b	Average inventory=	Q/2	39.53
Answer c	Time between orders	days per year/orders per year	39.53
Answer d	Reorder point, ROP=	(D/working days)*LT	10

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