1. In the chart below clearly identify and label (a) the replenishment order quantity, (b) re-order point, and (c) the demand during replenishment lead-time.
2. Assume: Annual demand = 64,000 Value of 1 unit = $320
Carrying cost per $ of inventory = 25%
Cost of placing an order = $400
Replenishment lead-time = 12 days
Assume 365 days in a year
(a) What is the replenishment quantity (to the nearest whole number)?
(b) What is the re-order point?
(c) What is the total annual cost?
TAC = QS + AR Q = √ 2RA
2 Q S
Read the following mini-case for questions 3-6.
Last year Rick Palmer retired from playing gigs and opened a guitar store in his home town of Hobbs, New Mexico. By leveraging his website, sales have grown to a current level of 1,800 per month which comes out at 21,600 units annually. Rick estimates it costs him $8 each time he places an order with his supplier. He would like to grow his business but worries about the $15 cost his assistant manager says it costs to store each guitar.
3. In the case above, what is the value of R?
a) 8
b) 15
c) 1,800
d) 21,600
4. In the case above, what is the value of A?
a) 8
b) 15
c) 1,800
d) 21,600
5. In the case above, what is the value of S?
a) 8
b) 15
c) 1,800
d) 21,600
6. In the case above, what is the value of Q (to the nearest whole number)?
a) 43
b) 152
c) 191
d) 1,800
