A distribution company purchases two parts from the same supplier. When the company places an order there is a common procurement cost of $1750, in addition to $300 (Product I) and $100 (Product II) of individual procurement costs. Product I has a weekly demand of 500 units with a standard deviation of 50 units, Product I values $200, target CSL is 94%, and lead time is one month. Product II has a weekly demand of 60 units with a standard deviation of 15 units, each Product II values $1200, target CSL is 99%, and lead time is 3 months. The company uses 24% as the inventory holding rate per year (1 year is 52 weeks or 12 months) • Assuming each product is individually ordered using periodic review policy, compute T*, M*, and TC of Product I and II individually. •Assuming these products are jointly replenished, what will be the T*, M₁, M₁, TC? · What is the amount of savings when products are jointly ordered compared to individual ordering?

A distribution company purchases two parts from the same supplier. When the company places an order there is a common procurement cost of $1750, in addition to $300 (Product I) and $100 (Product II) of individual procurement costs. Product I has a weekly demand of 500 units with a standard deviation of 50 units, Product I values $200, target CSL is 94%, and lead time is one month. Product II has a weekly demand of 60 units with a standard deviation of 15 units, each Product II values $1200, target CSL is 99%, and lead time is 3 months. The company uses 24% as the inventory holding rate per year (1 year is 52 weeks or 12 months) • Assuming each product is individually ordered using periodic review policy, compute T, M, and TC of Product I and II individually. •Assuming these products are jointly replenished, what will be the T*, M₁, M₁, TC? · What is the amount of savings when products are jointly ordered compared to individual ordering?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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