days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity. a. Alexis' EOQ is units. (Round to the nearest whole number.)
days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity. a. Alexis' EOQ is units. (Round to the nearest whole number.)
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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![**EOQ, Reorder Point, and Safety Stock**
Alexis Company uses 916 units of a product per year on a continuous basis. The product has a fixed cost of $60 per order, and its carrying cost is $3 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock.
a. Calculate the EOQ.
b. Determine the average level of inventory. *(Note: Use a 365-day year to calculate daily usage.)*
c. Determine the reorder point.
d. Indicate which of the following variables change if the firm does not hold the safety stock:
(1) order cost,
(2) carrying cost,
(3) total inventory cost,
(4) reorder point,
(5) economic order quantity.
---
a. Alexis’ EOQ is [ ] units. *(Round to the nearest whole number.)*](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb3b07c0a-1a3f-49c8-9960-f391d5264025%2Fecaa0e5a-8b3d-45b8-8422-16c51fa5e209%2Ftada44y_processed.png&w=3840&q=75)
Transcribed Image Text:**EOQ, Reorder Point, and Safety Stock**
Alexis Company uses 916 units of a product per year on a continuous basis. The product has a fixed cost of $60 per order, and its carrying cost is $3 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock.
a. Calculate the EOQ.
b. Determine the average level of inventory. *(Note: Use a 365-day year to calculate daily usage.)*
c. Determine the reorder point.
d. Indicate which of the following variables change if the firm does not hold the safety stock:
(1) order cost,
(2) carrying cost,
(3) total inventory cost,
(4) reorder point,
(5) economic order quantity.
---
a. Alexis’ EOQ is [ ] units. *(Round to the nearest whole number.)*
Expert Solution
Step 1: Introduce economic order quantity method
The economic order quantity technique is used to manage the inventory effectively. It measures the optimal amount of quantity to be ordered so that the ordering, carrying, and purchasing costs are minimal. It also ensures less wastage and no backorders.
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