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Fly-at-Night Express uses 10,000 #3 envelopes per month. It costs $50 to order and receive a shipment of these envelopes. The envelopes cost $.40 each, and Fly-at-Night uses an inventory carrying cost rate of $.12 per envelope per year. (a) Determine the economic order quantity (EOQ). (b) Determine the time between orders when the EOQ is used if Fly-at-Night operates 307 days per year. (c) Calculate the total cost of managing the inventory when the EOQ is used. (c) What should the reorder point be if the envelope supplier takes ten working days to deliver? (d) If the usage rate given is an average and the standard deviation of daily usage of envelopes is 75, what should the reorder point and safety stock be if Fly-at-Night wants to take no more than a 5% chance of running out of stock of envelopes during any given order cycle (i.e., Zα = 1.645)?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M93101477

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