The Cover-up Drapery Company carries four types of fabric with the following characteristics: Type       Annual Demand (yards) Item      Cost per Yard   1                        300                                             $20   2                        250                                             $18   3                        100                                             $12   4                          200                                           $ 8  Assume that the items are to be ordered together from the same supplier at an ordering cost of $20 per order and an annual carrying cost of 20 percent. Also assume 300  working days in a year. a. If a P system is used, what is the optimal ordering interval in days? b. How much of each type of carpet would be ordered when a combined order is placed? c. What is the effect on the ordering interval of changing the carrying cost to 25, 30, and 35 percent? d. Why can’t these carpets be ordered by using a Q system? e. Classify the four items above as A, B, or C inventory items.

Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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The Cover-up Drapery Company carries four types of fabric with the following characteristics:
Type       Annual Demand (yards) Item      Cost per Yard
  1                        300                                             $20
  2                        250                                             $18
  3                        100                                             $12
  4                          200                                           $ 8
 Assume that the items are to be ordered together from the same supplier at an ordering cost of $20 per order and an annual carrying cost of 20 percent. Also assume 300  working days in a year.
a. If a P system is used, what is the optimal ordering interval in days?
b. How much of each type of carpet would be ordered when a combined order is placed?
c. What is the effect on the ordering interval of changing the carrying cost to 25, 30, and 35 percent?
d. Why can’t these carpets be ordered by using a Q system?
e. Classify the four items above as A, B, or C inventory items.

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