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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Net Steels is a steel manufacturing company. It currently orders 180 metric tons of raw material per order. It was
observed that the company often faces stockout. To tackle this issue, the company incorporated a fixed-quantity system
(FQS) and collected the following data. The lead time is 2 weeks.
Demand
Order Cost
Item Cost
Inventory-Holding Cost
10000 metric tons per year
$17000 per order
$38000 per year
20 percent per year
Assuming there are 50 weeks a year, determine the reorder point. Only for non-integer results, round your answer UP
to the nearest integer. For example, if your answer is 5.05, type 6; if your answer is 5, type 5.
2DCO
Economic Order Quantity (EOQ), Q* =
Cn
Reorder point, r =
demand rate x lead time
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