A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. Management wants to reevaluate its current inventory policy, which calls for order quantities of 440 counter-top mixers. The following data are estimated for the mixer: Average daily demand 100 mixers Standard deviation of daily demand 30 mixers Lead time (L) = 3 days Holding Cost (H) = $9.40/order/year Ordering Cost (S) = $35/order Cycle service level = 92% The distributor uses a continuous review (Q) system What order quantity, Q, and reorder point, R, should be used? What is the total annual cost of the system? If on-hand inventory is 40 units, one open order for 440 mixers is pending and no back orders exist, should a new order be placed?
A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. Management wants to reevaluate its current inventory policy, which calls for order quantities of 440 counter-top mixers. The following data are estimated for the mixer: Average daily demand 100 mixers Standard deviation of daily demand 30 mixers Lead time (L) = 3 days Holding Cost (H) = $9.40/order/year Ordering Cost (S) = $35/order Cycle service level = 92% The distributor uses a continuous review (Q) system What order quantity, Q, and reorder point, R, should be used? What is the total annual cost of the system? If on-hand inventory is 40 units, one open order for 440 mixers is pending and no back orders exist, should a new order be placed?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Case Study 4: Inventory Management.
(II) A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. Management wants to reevaluate its current inventory policy, which calls for order quantities of 440 counter-top mixers. The following data are estimated for the mixer:
- Average daily demand 100 mixers
- Standard deviation of daily demand 30 mixers
- Lead time (L) = 3 days
- Holding Cost (H) = $9.40/order/year
- Ordering Cost (S) = $35/order
- Cycle service level = 92%
- The distributor uses a continuous review (Q) system
- What order quantity, Q, and reorder point, R, should be used?
- What is the total annual cost of the system?
- If on-hand inventory is 40 units, one open order for 440 mixers is pending and no back orders exist, should a new order be placed?
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