Troy Enterprises Uses a Continuous Review Inventory Control System

question 114

Short Answer

Troy Enterprises uses a continuous review inventory control system. The firm operates 50 weeks per year, with an annual demand of 50,000 units, an ordering cost of $35 per order, a holding cost of $1 per unit per year, a lead time of 3 weeks, and a standard deviation of demand during lead time equal to 216.51 units.
(a) How many units should be ordered at a time (rounded to the nearest unit)?
(b) What is the reorder point if a 94% order-cycle service level is desired?

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Definitions:

Absolute Advantage

The ability of a country or individual to produce a good or service more efficiently than others, using fewer resources.

Terms Of Trade

How much of one good exchanges for a unit of another good.

Comparative Advantage

The ability of a country or entity to produce a particular good or service at a lower opportunity cost than others, leading to more efficient international trade.

World Output

The total value of goods and services produced across the globe within a specific time frame, often used to measure the economic performance of the global economy.