Answer:
Best reorder size = 216
Reorder point = 35
Explanation:
Required:
Using the above information, find the best order size and the reorder point.
To find the best order size, EOQ, use the formula:
[tex] EOQ = \sqrt{\frac{2DS}{H}} [/tex]
[tex] = \sqrt{\frac{2*3500*50}{0.25*30}} [/tex]
[tex] = \sqrt{\frac{350000}{7.5}} [/tex]
[tex] = 216.02 [/tex]
Best reorder size is 216 mufflers
To find the reorder point, use the formula:
R = d' L + z [tex] \sigma_L [/tex]
Where d' = average daily demand
L = lead time in days
z = number of standard deviation from a specified probability
[tex] \sigma_L[/tex] = standard deviation of usage in lead time
Daily demand, d'= [tex] \frac{3500}{300} = 12 [/tex]
12 mufflers
Since lead time is 2 working days, standard deviation of lead time [tex] \sigma_L = \sqrt{2} * 6 = 8.48 [/tex]
Therefore,
R = d' L + z [tex] \sigma_L [/tex]
= (12 * 2) + (1.28 * 8.48)
= 24 + 10.9
= 34.9
Approximately 35
Reorder point is = 35 mufflers
a. Based on the information given best order size mufflers is 216 mufflers.
b. Based on the information given reorder point mufflers is 34 mufflers.
a. Best order size mufflers:
Qopt =√((2DS)/H)
Qopt = √((2x3,500x50)/0.25x30
Qopt =√350,000/7.5
Qopt =√46,667
Qopt =215.9
Qopt = 216 mufflers (Approximately)
b. Reorder point mufflers:
σL = √(Lσ²)
√(2(6)= 8.49 mufflers
90% standard normal distribution, z=1.28
R = dbarL + zσL
R = (3,500/300)(2) + 1.28(8.49)
R= 23.33+10.87
R = 34 mufflers
Inconclusion the best order size mufflers is 216 mufflers and the reorder point mufflers is 34 mufflers.
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