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Question: joe henrys machine shop uses 2500 brackets during the course...

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Joe Henry's machine shop uses 2500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets:

Annual demand: 2500

Holding cost per bracket per year: $ 1.50

Order cost per order: $ 18.75

Lead time: 10 days

Working days per year: 250

The Accounting department is concerned about Henry’s proposal and favors a periodic review system where orders are placed regularly every four weeks.

  1. Find the level of the safety stock if the cycle service level is to stay at 98%, z = 2.06.
  2. Find the number of orders per year and the annual ordering cost.
  3. Find the average order size and the annual cost of holding the cycle inventory (i.e., excluding the safety stock).
  4. Find the total annual inventory cost of this system, including the cost of the merchandise and the holding cost of the safety stock.
  5. You are currently at a reorder point and find that there are exactly 130 units left in stock. How many units should you order?
  6. Determine the probability that you experience a stockout situation before the current order is delivered.
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