Answer:
Please find the detailed answer as follows:
Explanation:
Daily Demand
Daily Demand = Annual Demand / Working days per year
= 5,000 units / 250 days
= 20 units per day
Economic Order Quantity [EOQ]
Economic Order Quantity [EOQ] is calculated by using the following formula
Economic Order Quantity = [(2 × Annual Demand x Ordering Cost) / Carrying Cost Per Order]½
Economic Order Quantity = [(2 × Annual Demand x Ordering Cost) / Carrying Cost Per Order] ½
= [(2 × 5,000 x 32) / 2]½
= [320,000 / 2] ½
= [160,000]½
= 400 Units
Reorder point and inventory on hand if the lead time is 5 Days
Re-order Point = 100 Units [5 Days x 20 units per day]
Inventory position and inventory on hand = 100 units [Since, the Re-order Point is less than the EOQ]
Reorder point and inventory on hand if the lead time is 15 Days
Re-order Point = 300 Units [15 Days x 20 units per day]
Inventory position and inventory on hand = 300 units [Since, the Re-order Point is less than the EOQ]
Reorder point and inventory on hand if the lead time is 25 Days
Re-order Point = 500 Units [25 Days x 20 units per day]
Inventory position and inventory on hand = 400 units [Since, the Re-order Point is greater than the EOQ]
Reorder point and inventory on hand if the lead time is 45 Days
Re-order Point = 900 Units [45 Days x 20 units per day]
Inventory position and inventory on hand = 400 units [Since, the Re-order Point is greater than the EOQ]
