Instructions: A. If any information that is needed for your calculation/analysis is missing, go ahead and look it up in the textbook or elsewhere and if not available, go ahead and assume B. All answers should outline the step-by-step method used to arrive at the answer. Full marks will only be given for the correct steps/method to arrive at the answer. Method will carry more marks than just getting the right answer. C. This is a group exercise and all group members should be involved in the analysis and outlining the steps. Exercise: ABC Corporation has the following information about a product that it carries in stock. Average demand = 40 units per day Average Lead time = 15 days Item Unit Cost = $55 for orders for orders less than 400 units Item Unit Cost = $50 for orders of 400 units or more Ordering cost=$30 Inventory Carrying cost = 20% The business year is 300 days Standard deviation of demand = 2.5 units Standard deviation of lead time=1.5 days Desired service level = 97.5 % Questions: 1. What is the annual total acquisition cost of ordering at the $55 price? 2. What is the annual total acquisition cost of ordering at the $50 price? 3. What level of safety stock should the company maintain for the item? 4. If the company chooses the ordering policy that results in the lowest total annual acquisition cost and maintains the safety stock level for 97.5% service, what will be the average inventory of the company for this item? 5. Given your answer in (4) above, what will the annual inventory turnover rate be for this item? 6. What will the reorder point be for the item? Instructions: A. If any information that is needed for your calculation/analysis is missing, go ahead and look it up in the textbook or elsewhere and if not available, go ahead and assume B. All answers should outline the step-by-step method used to arrive at the answer. Full marks will only be given for the correct steps/method to arrive at the answer. Method will carry more marks than just getting the right answer. C. This is a group exercise and all group members should be involved in the analysis and outlining the steps. Exercise: ABC Corporation has the following information about a product that it carries in stock. Average demand = 40 units per day Average Lead time = 15 days Item Unit Cost = $55 for orders for orders less than 400 units Item Unit Cost = $50 for orders of 400 units or more Ordering cost=$30 Inventory Carrying cost = 20% The business year is 300 days Standard deviation of demand = 2.5 units Standard deviation of lead time=1.5 days Desired service level = 97.5 % Questions: 1. What is the annual total acquisition cost of ordering at the $55 price? 2. What is the annual total acquisition cost of ordering at the $50 price? 3. What level of safety stock should the company maintain for the item? 4. If the company chooses the ordering policy that results in the lowest total annual acquisition cost and maintains the safety stock level for 97.5% service, what will be the average inventory of the company for this item? 5. Given your answer in (4) above, what will the annual inventory turnover rate be for this item? 6. What will the reorder point be for the item
