A Store Has Collected the Following Information on One of Its

question 39

Essay

A store has collected the following information on one of its products:
Demand = 10,000 units/year
Standard deviation of weekly demand = 25 units
Ordering costs = $30/order
Holding costs = $4/unit/year
Cycle-service level = 95% (z for 95% = 1.65)
Lead-time = 2 weeks
Number of weeks per year = 50 weeks
a. If a firm uses the continuous review system to control the inventory, what would be the order quantity and reorder point?
b. The firm decided to change to the periodic review system to control the item's inventory. For the most recent review, an inventory clerk checked the inventory of this item and found 200 units. There were no scheduled receipts or backorders at the time. How many units should be ordered? (Hint: Use the EOQ model to derive P, the time between reviews.)

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Definitions:

Dividend

A payment made by a corporation to its shareholders, usually derived from profits.

Stock Owners

Individuals or entities that hold shares of stock in a corporation, representing partial ownership of that corporation.

Par Preferred Stock

Preferred shares of a company's stock with a fixed face value that typically determines dividend payments.

Par Common Stock

This is a classification of common stock that has a nominal value assigned in the corporate charter and is used in the accounting records.