Concept explainers
Petromax Enterprises uses a continuous review inventory
- What is the economic order quantity for this item?
- If Petromax wants to provide a 90 percent cycle service level, what should be the safety stock and the reorder point?
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- PART A Speedy Bicycle Company (SBC) is a wholesale distributor of a wide variety of bicycles and bicycle parts. The most popular model is the Dragonfly, which sells for $170. All manufacturing is done at a plant in China, and shipment takes a month (30 days) from the time an order is placed. The estimated order cost is $75, including customs clearance. SBC's cost per bicycle is 65% of retail price, and inventory carrying cost is 11% per year of SBC's cost. If the company cannot fulfill a retail order, the retailer will get the shipment from another distributor and SBC loses that business. SBC is planning inventory for 2023 based on forecasted demand and wants to maintain a 93% service level to minimize lost orders. The company has 300 working days per year. 2021 Forecasted Demand for the Dragonfly Bicycle Model: F A M J 15 58 96 J 8 M 31 J per order 1 Inventory Activity 59 38 (round to nearest cent) 2 bicycles 6 A 23 Develop an inventory plan for the Dragonfly model. Canvas responses…arrow_forwardKabel Market store sells electric cable. The demand for cable is normally distributed. The inventory related information at Kabel Market is as follows: Average Annual Demand = 16,900 meters Standard deviation of weekly demand = 28 meters Cable selling price = AMD 640.00 per meter Ordering cost = AMD 1,250.00 per order Lead time = 5 weeks Annual inventory-holding cost estimate = 2.5% of the cable selling price Required service level = 95% Kabel Market works 52 weeks a year. Note: The approximate z values are: for 0.9 ≈ 1.28, for 0.92 ≈ 1.405, for 0.95 ≈ 1.645, for 0.98 ≈ 2.05. Suppose the bar management practices the fixed-QUANTITY ordering system with the use of the economic order quantity. Answer the following questions: (i) How many meters of cable they order from the supplier each time? (ii) When do they place an order? (iii) What is the safety stock?arrow_forwardSam's Cat Hotel operates 50 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $12.00 per bag. The following information is available about these bags: > Demand = 95 bags/week > Order cost = $50.00/order > Annual holding cost = 20 percent of cost > Desired cycle-service level = 80 percent > Lead time =5 weeks (30 working days) > Standard deviation of weekly demand = 15 bags > Current on-hand inventory is 320 bags, with no open orders or backorders. a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be $ higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)arrow_forward
- Earthbound Corporation is a manufacturer and distributor of air conditioning systems. You have been engaged to install an accounting system for Earthbound period among the inventory control features earthbound desires as part of the system are indicators of how much to order and when period. The following information is furnished for a product called “Hydronix” which is carried in inventory: Hydronix are sold by the gross (12 dozen) at a list price of P800 per gross FOB shipper. John receives a 40% trade discount off list price on purchases in gross lots. Freight cost is P20 gross from the shipping point to John's plant John uses about 5,000 Hydronix during 259-day production year and must purchase a total of 36 gross per year to allow for normal breakage. Minimum and maximum usages are 12 and 28, respectively. It takes 20 working days (normal delivery time) to receive an order from the date the purchase request is initiated. A rush order in full gross lots can be received by air…arrow_forwardDescribe the advantages of vendor managed inventory ?arrow_forwardI need answers A company uses on an average 216 parts a day with a standard deviation of 16 parts per day in a manufacturing process. Cost of placing and receiving an ordering is BDT 40,000. Estimated monthly carrying cost is BDT 90 per part. Orders are delivered approximately 7 days after being placed. The delivery time is normal with a mean of 7 days and a standard deviation of 2 days. The company is open 360 days per year. Find the order quantity that is economical. If the Company takes 3% stock out risk, then find safety stock (SS) quantity and Re-Order Point? 3.If the supplier offers a discount of BDT 8 per circuit board for purchasing of 4000 boards at a time, then financially evaluate and justify whether the company will go with the offer or not? 4.The person who orders the boards follows this rule: Order when the amount on…arrow_forward
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning