Sports Uniforms Ltd Has an Average Annual Demand for Blue,medium

question 61

Essay

Sports Uniforms Ltd has an average annual demand for blue,medium polo shirts of 20 000 units.The cost of placing an order is $70 and the cost of carrying one unit in inventory for one year is $25.
Required:
a.Use the economic-order-quantity (EOQ)model to determine the optimal order size.
b.Determine the reorder point assuming a lead time of 10 days and a work year of 250 days.
c.Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units.
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Definitions:

Perfect Tender Rule

A principle in commercial law that allows buyers to reject goods if they do not meet all contract specifications, regardless of how minor the defect may be.

Material Breach

A substantial breach of a significant term or terms of a contract that excuses the nonbreaching party from further performance under the contract and gives the nonbreaching party the right to recover damages.

Substantial Performance

A legal concept in contract law where a party has performed enough of their contractual obligation to warrant payment, albeit with minor deviations from the terms.

Nonconforming Goods

Products delivered under a sales contract that do not meet the specifications, quality, or quantity requirements agreed upon by the buyer and seller.