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?
4. In the case above, what is the value of A?
5. In the case above, what is the value of S?
6. In the case above, what is the value of Q (to the nearest whole number)?