- This topic has 3 replies, 2 voices, and was last updated 8 years ago by
.
- Posts
Hi john sir..how r u..bck to opentuition after several months coz i know only u can help me. Plz have a look.
Annual demand 162000 units
Cost/unit $1000
Cost/order $27000
Holding cost/unit/year $300The units are used evenly throughout the year. The normal leadtime is 11 days and can take maximum 15 days. The delivery time and probabilty of their occurnce is given as follow:
11 days 68%
12 days 12%
13 days 10%
14 days 6%
15 days 4%Required:
What would be re-order level and safety stock if the company is willing to accept:(a) A 20% risk of being out of stock
(b) A 10% risk of being out of stockSoulution:
(a). Re-order level=( 450*11)+ 450*1 day
(b). Re-order level=( 450*11)+ 450*2 day
Dear john sir..
I know this is not a quesrion relevant to this subject but i will b very thankful if u help me in this coz u r the inly one who bling in my mind always whenever i find difficulty in cost accounting.I just want to knw why he multiplied the safety stock of 450 with the lead time of 1 day when there was 20% risk and why multiplied with 2 days when the risk was 10%. I cant figure it out any in way..plz help me..
It will b great favour if u helps me in this regard..my displine is diff now..plzThere is a 20% chance of being out of inventory if the lead time is more than 12 days (13 days is 10%, 14 days is 6%, 15 days is 4% – so a total of 20%).
Therefore they need to reorder when they have enough to last for 12 days, which is 12 x 450 units.
(Normally they only need 11 x 450, so the extra 450 is the after inventory)There is a 10% chance of being out of inventory if the lead time is more than 13 days (14 days is 6%, 15 days is 4% – so a total of 10%).
Therefore they need to reorder when they have enough to last for 13 days.Thannk you so much john sir thank u so much..you have been always a source of inspiration and support for me…
- The topic ‘Reorder level’ is closed to new replies.