Question

Develop a lot-for-lot solution and calculate total relevant costs for the gross requirements in the following table*.

Period	1	2	3	4	5	6	7	8	9	10	11	12
Gross requirements	20		40		30	70	20		20	80		60

*Holding cost equals=$2.50/unit/week;

setup cost equals=$150;

lead time equals=1 week;

beginning inventory equals=40.

 Develop a lot-for-lot solution (enter your responses as whole numbers).

Answer 1

We will assume that the inventory carrying cost is based on the ending inventory for a period and not the average inventory. With that in mind, our table is shown below along with the cost of inventory and setup (ordering).

Period	1	2	3	4	5	6	7	8	9	10	11	12
Gross requirements	20		40		30	70	20		20	80		60
On-hand at the beginning of period 40	40	20	20	0	0	0	0	0	0	0	0	0
On-hand at the end of period	20	20	0	0	0	0	0	0	0	0	0	0
Order receipt		0	20	0	30	70	20	0	20	80	0	60
Order release	0	20	0	30	70	20	0	20	80	0	60
Inventory cost	50	50	0	0	0	0	0	0	0	0	0	0
Setup cost	0	150	0	150	150	150	0	150	150	0	150	0