Inventory management problem:EOQ, ROP, P model
Not what you're looking for?
A small copy center uses five 500 sheet boxes of copy paper a week. Experience suggests that usage can be well approximated by a normal distribution with a mean of 5 boxes per week and a standard deviation of one-half box per week. Two weeks are required to fill an order for letterhead stationary. Ordering cost is $ 2.00 and annual holding is 20 cents per box
A) determine the economic order quantity, assuming a 52 week year
B) If the copy center reorders when the supply on hand is 12 boxes, compute risk of a stockout.
c) If a fixed interval of seven weeks instead of ROP is used for reordering, what risk does the copy center incur that it will run out of stationary before this order arrives if it orders 36 boxes when the amount on hand is 12 boxes?
Purchase this Solution
Solution Summary
Inventory management problem:EOQ, ROP, P model
Solution Preview
Please see the attached file.
Solution:
Demand per week (d)= 5 boxes
D=5*52 =260 boxes per annum
Standard deviation = 0.5boxes per week
LT = 2 weeks
Co =$2 per order
Ch=$0.20 per box per year
A) Determine the economic order quantity, assuming a 52 week year
EOQ = = 72.11 = 72 boxes
EOQ =72 boxes
B) If the copy center reorders when the supply on hand is 12 boxes, compute risk of a stock out.
Risk of stock out is the probability that the demand will be greater than 12 boxes during the lead time.
Re-order point = DDLT + Safety stock
? DDLT = demand ...
Purchase this Solution
Free BrainMass Quizzes
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Introduction to Finance
This quiz test introductory finance topics.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.