Accg301 Week 5 Tutorial Answers
Suggested answers of the tutorial questions
EXERCISE 15.25
1
Safety stock: The lead time is one month, so the safety stock is equal to the difference between average monthly usage and the maximum usage in a month. Average monthly usage is 70 tonnes (840/12), and the maximum usage is 80 tonnes. Therefore, the safety stock is 10 tonnes (80 – 70).
2
Reorder point: The reorder point is 80 tonnes. This is the maximum amount of the chemical that would be used in a month, and this is the time that it takes to receive an order after it is placed.
ROP
= (inventory used per period of time x order lead time) + safety stock
= (70 tonnes x 1 month) + 10 tonnes
= 80 tonnes
PROBLEM 15.35
1
Economic order quantity
=
( 2)( annual requiremen t )( cost per order ) annual carrying cost per unit
=
(2)(4 800)($150)
$4
=
2
360 000 = 600
Using the formula given for requirement 1:
Total annual cost of ordering and storing
XL-20
4 800
600
$150
$4
600
2
=
$2 400
Note that this cost does not include the actual cost of XL-20 purchases (i.e. the quantity purchased multiplied by the price).
3
Orders per year:
Number of orders per year
=
=
annual requiremen t
order quantity
4
4 800
8
600
Using the new cost data:
(a)
EOQ
=
(2) (annual requiremen t) (cost per order) annual carrying cost per unit
=
(2)(4 800)($30)
$20
=
(b)
Number of orders per year
=
14 400 = 120 annual requiremen t order quantity
=
40
4 800
120
PROBLEM 15.36
1
The reorder point is calculated using the initial data in P15.35. That is, the new data in requirement 4 of
P15.35 is disregarded.
Reorder point: annual usage
Monthly usage
=
12
=
4 800
= 400 canisters
12
Usage during one-month lead time
=
400 canisters 1 month
Reorder point
=
400 canisters
The chemical XL-20 should be ordered in the economic order quantity of
EXERCISE 15.25
1
Safety stock: The lead time is one month, so the safety stock is equal to the difference between average monthly usage and the maximum usage in a month. Average monthly usage is 70 tonnes (840/12), and the maximum usage is 80 tonnes. Therefore, the safety stock is 10 tonnes (80 – 70).
2
Reorder point: The reorder point is 80 tonnes. This is the maximum amount of the chemical that would be used in a month, and this is the time that it takes to receive an order after it is placed.
ROP
= (inventory used per period of time x order lead time) + safety stock
= (70 tonnes x 1 month) + 10 tonnes
= 80 tonnes
PROBLEM 15.35
1
Economic order quantity
=
( 2)( annual requiremen t )( cost per order ) annual carrying cost per unit
=
(2)(4 800)($150)
$4
=
2
360 000 = 600
Using the formula given for requirement 1:
Total annual cost of ordering and storing
XL-20
4 800
600
$150
$4
600
2
=
$2 400
Note that this cost does not include the actual cost of XL-20 purchases (i.e. the quantity purchased multiplied by the price).
3
Orders per year:
Number of orders per year
=
=
annual requiremen t
order quantity
4
4 800
8
600
Using the new cost data:
(a)
EOQ
=
(2) (annual requiremen t) (cost per order) annual carrying cost per unit
=
(2)(4 800)($30)
$20
=
(b)
Number of orders per year
=
14 400 = 120 annual requiremen t order quantity
=
40
4 800
120
PROBLEM 15.36
1
The reorder point is calculated using the initial data in P15.35. That is, the new data in requirement 4 of
P15.35 is disregarded.
Reorder point: annual usage
Monthly usage
=
12
=
4 800
= 400 canisters
12
Usage during one-month lead time
=
400 canisters 1 month
Reorder point
=
400 canisters
The chemical XL-20 should be ordered in the economic order quantity of