Problem 1:

Jill's Job Shop buys the following Part (X-123) for use in its production system. The parts are needed throughout the entire 52-week year. Data for the part are as follows:

ITEM

X-123

Annual demand

10,400

Holding cost per unit per year

$6

Order cost

$300

Lead time

4 weeks

Safety stock

100 units

Item cost

$10.00

a) Compute the optimal order quantity.

b) What is the reorder point for X-123?

Problem 2:

Benji's Bar and Restaurant uses 5,000 quart bottles of an imported wine each year (closed two weeks per year). Weekly demand is 100 bottles with a standard deviation of 25 bottles. The wine costs $3 per bottle and is served only in whole bottles because it loses its bubbles quickly. Benji figures that it costs $10 each time an order is placed, and holding costs are 20 percent of the purchase price. It takes four weeks for an order to arrive.

Benji would like to use an inventory system (Fixed - Order Quantity model) that will provide a service level of 90 percent. At what inventory level (reorder point) should he place an order?

Problem 3:

UDI Pharmaceuticals orders its antibiotics every three weeks (21 days) when a salesperson visits from one of the Pharmaceutical companies. Tetracycline is one of its most prescribed antibiotics, with average daily demand of 1,000 capsules. The standard deviation of daily demand was derived from examining prescriptions filled over the past three months and was found to be 100 capsules. It takes four days for the order to arrive.

UDI uses Fixed - Time Period Model. UDI would like to satisfy 90 percent of the prescriptions. The salesperson just arrived, and there are currently 20,000 capsules in stock. How many capsules should be ordered?