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. Â 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) Â
√(2(6)= 8.49 mufflers
90% Â 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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