The cost placing an order is 120order the supplier promises


Bell computers purchases IC chips from a supplier at $350/chip. The holding cost has been estimated to be 10% of purchase price. It has estimated that Bell will need 4800 chips per year. Bell operates 250 day per year.  The company wants to maintain a service level of 95%.

Data from supplier:

The cost placing an order is $120/order. The supplier promises an average lead time of ten days with a standard deviation of 2.5 days. Based on past Bell has estimated that daily demand during lead time is normally distributed with a mean of 19.2 and a standard deviation of 4.5.

The supplier has promised the following discount schedule if Bell orders larger quantities:

Vendor 1

Quantity

Discount

1-599

0%

600-1199

2%

1200+

3%

  • What is the Economic order quantity?
  • What is the safety stock?
  • What is the reorder point?
  • What is the total cost including cost of purchasing the parts.

Solution Preview :

Prepared by a verified Expert
Business Management: The cost placing an order is 120order the supplier promises
Reference No:- TGS01540548

Now Priced at $20 (50% Discount)

Recommended (96%)

Rated (4.8/5)