The materials manager for a billiard ball maker must periodically place orders for resin, one of the materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is 4 days.
1. At what point should resin be reordered?
2. If order size were 1,000 kilograms of resin, what would be the lenght of an order cycle?
3. If the order size were 1,000 kilograms of resin, what would the average inventory level?
4. If the order size were 1,000 kilograms of resin, what would be the daily total inventory costs, EXCLUDING the cost of resin?
5. What is the economic order quantity for resin?