Question
Brown Ltd. has obtained the following costs and other data pertaining to one of its raw materials: Working days per year, 250 days Normal use
Brown Ltd. has obtained the following costs and other data pertaining to one of its raw materials:
Working days per year, 250 days Normal use per day, 400 units Maximum use per day, 600 units Minimum use per day, 100 units Lead time, 8 days Cost of placing one order, $20.00 Carrying cost per unit per year, $0.30
Required: Compute the following:1. EOQ.,2. Safety stock.
3. Reorder point.4 Normal maximum inventory. 5. Absolute maximum inventory.
6. Average inventory. 7.
Assume use per day can occur with the following probabilities (Round up "Orders per year" value. Round your final answer to the nearest whole number.):
Daily Demand | Probability |
400 | 0.40 |
450 | 0.30 |
500 | 0.20 |
550 | 0.05 |
600 | 0.05 |
|
Stock-out costs are estimated to be $0.05 per unit. Determine the safety stock amount that minimizes the expected costs involved.
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