9. One of the products sold by Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer: Average weekly demand (52 weeks per year): Standard deviation of weekly demand: 60 printers 12 printers 3 weeks Order lead time: Standard deviation of order DIS lead time: O (lead times are constant) Item cost: $120 per printer $2 Cost to place an order: Yearly holding cost per printer: $48 Desired service level during reordering period: 99% (z = 2.33) %3D a. () What is the economic order quantity for the printer? b. (**) Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two? c. (") Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work. d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs: + Ss H e. (***) What is the annual cost of holding inventory including the safety stock? How much of this cost i due to the safety stock? f. (***) Suppose OfficeMax is able to cut the lead time to constant 1 week. What would the new safety stock leve be? How much would this reduce annual holding costs
9. One of the products sold by Packard LaserJet Z99 printer. As purchasing manager, you have the following information for the printer: Average weekly demand (52 weeks per year): Standard deviation of weekly demand: 60 printers 12 printers 3 weeks Order lead time: Standard deviation of order DIS lead time: O (lead times are constant) Item cost: $120 per printer $2 Cost to place an order: Yearly holding cost per printer: $48 Desired service level during reordering period: 99% (z = 2.33) %3D a. () What is the economic order quantity for the printer? b. (**) Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. What do you notice about the two? c. (") Suppose OfficeMax currently orders 120 printers at a time. How much more or less would OfficeMax pay in holding and ordering costs per year if it ordered just 12 printers at a time? Show your work. d. (**) What is the reorder point for the printer? How much of the reorder point consists of safety stock? For parts e and f, use the following formula to consider the impact of safety stock (SS) on average inventory levels and annual holding costs: + Ss H e. (***) What is the annual cost of holding inventory including the safety stock? How much of this cost i due to the safety stock? f. (***) Suppose OfficeMax is able to cut the lead time to constant 1 week. What would the new safety stock leve be? How much would this reduce annual holding costs
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:9. One of the products sold by OfficeMax is a Hewlett-
Packard LaserJet Z99 printer. As purchasing manager, you
have the following information for the printer:
Average weekly demand (52
weeks per year):
Standard deviation of weekly
demand:
60 printers
12 printers
Order lead time:
3 weeks
Standard deviation of order
DIS lead time:
O (lead times are
constant)
$120 per printer
Item cost:
Cost to place an order:
Yearly holding cost per printer: $48
Desired service level during
reordering period:
$2
99% (z = 2.33)
a. () What is the economic order quantity for the printer?
b. (*") Calculate annual ordering costs and holding costs
(ignoring safety stock) for the EOQ. What do you
notice about the two?
c. (*") Suppose OfficeMax currently orders 120 printers
at a time. How much more or less would OfficeMax
pay in holding and ordering costs per year if it ordered
just 12 printers at a time? Show your work.
d. (**) What is the reorder point for the printer? How
much of the reorder point consists of safety stock?
For parts e and f, use the following formula to consider
the impact of safety stock (SS) on average inventory
levels and annual holding costs:
Q.
+ Ss H
2
e. (***) What is the annual cost of holding inventory,
including the safety stock? How much of this cost is
due to the safety stock?
f. (***) Suppose OfficeMax is able to cut the lead time to a
constant 1 week. What would the new safety stock level
be? How much would this reduce annual holding costs?
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