Question
Suppose you purchase a $4-per-unit part from a supplier with which you assemble red widgets.On average, you use 50,000 units of this part each year.The
Suppose you purchase a $4-per-unit part from a supplier with which you assemble red widgets.On average, you use 50,000 units of this part each year.The recommended selling price of the product is $5-per-unit.Every time you order this particular part, you incur a sizable ordering cost of $800 regardless of the number of parts that you order.Your cost of capital is 20% per year.A) How many parts should you purchase each time you place an order?B) If the lead time is 4 weeks, what is the re-order point (ROP) - assume no safety stock is used? C)If the standard deviation of the weekly demand forecast is 50 and you want to guarantee a 90% in-stock level, what is the ROP with Safety Stock?
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