Operations Management
Assignment: Inventory Control
I would like like the solution "step by step"
The manager of a construction firm has determined from historical records that demand for cement averages 5 tons per week with a standard deviation of 3 tons. The supply lead time is 4 weeks. The cost of a ton of cement is $100 and inventory carrying cost is estimated at an annual rate of 30%. The cost of placing an order is $96.
[Assume 50 weeks in a year.]
Compute the following:
a. Economic order quantity
b. Number of orders per year
c. Cycle length (i.e., number of weeks between consecutive orders)
d. Average inventory level
e. Total annual cost of ordering + inventory carrying
f. Compute the reorder pointand the corresponding safety stock for each of the following service levels:
i. 90%
ii. 95%
iii. 99%
iv. 99.9%
v. 99.99%