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nventory Activity PART A Speedy Bicycle Company ( SBC ) is a wholesale distributor of a wide variety of bicycles and bicycle parts. The most

nventory Activity
PART A
Speedy Bicycle Company (SBC) is a wholesale distributor of a wide variety of bicycles and bicycle parts. The most popular model is
the Dragonfly, which sells for $180. All manufacturing is done at a plant in China, and shipment takes a month (30 days) from the
time an order is placed. The estimated order cost is $75, including customs clearance. SBCs cost per bicycle is 65% of selling price,
and inventory carrying cost is 11% per year of SBCs cost. If the company cannot fulfill a retail order, the retailer will get the
shipment from another distributor and SBC loses that business. SBC is planning inventory for 2023 based on forecasted demand and
wants to maintain a 93% service level to minimize lost orders. The company has 300 working days per year.
2021 Forecasted Demand for the Dragonfly Bicycle Model:
J F M A M J J A S O N D
81531589659382316142641
Develop an inventory plan for the Dragonfly model. Canvas responses shown in red.
Get organized:
Order cost = $__________ per order 1
Cost per bicycle = $_____________(round to nearest cent)2
Annual holding cost per bicycle = $__________3(round to nearest cent)
Service level =_________% so z =__________4
Lead time =__________ days 5
Annual demand for 2023=__________ bicycles 6
Answer:
1. What is the economic order quantity? Q =__________7(round to nearest whole number)
2. If average demand during lead time is normally distributed with a standard deviation of 2.5 bicycles, what is the reorder point
with the desired service level?
Safety stock =__________8 bicycles ROP =__________9 bicycles (round both to nearest whole number)
3. What is the total annual inventory cost including safety stock? $______________10(round to nearest dollar)
4. If SBC is currently ordering 100 bicycles at a time, how much is the company overpaying in total inventory cost?
$______________11(round to nearest dollar)
5. Each year during their anniversary celebration, SBC offers a collectable water bottle at the special price of $5. They typically sell
100 bottles with a standard deviation of 12 bottles. The cost of each bottle is $1.80, and any unsold inventory is donated to a local
charity. What is the service level and optimal order quantity for the water bottles?
Service level =____________________%12 Optimal order quantity =________________________13
6. What is the Dragonflys ADV (round to nearest 1 decimal)? If SBCs total inventory based on ADV is $275,000, what percent of the
total inventory based on ADV does the Dragonfly represent? (nearest whole percent)14
7. If SBCs COGS on its income statement is $412,500 and its balance sheet lists inventory at $83,600, what is its IT? If the industry
average is 8 weeks of supply, how does SBC compare (better or worse)?15
MORE
Part B
After watching this 5-minute video from WSJ Why Everything Is On Sale: The Bullwhip Effect answer the following:
1. The chart showed that retailers traditionally balance __ with __ by maintaining a sales/inventory ratio of about ___. Now
that ratio is about __, which means ___ inventory turnover. 16
2. The bullwhip effect was demonstrated in the leisure apparel example by demand ____ through the supply chain and ____
when it was supposed to hit the store shelves. In the past, this type of inventory and the bullwhip effect have been fair
indicators for ___, but globalization has made it more difficult to forecast. Sales could mean good news because of _____
or bad news because of ____.

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