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Name: Tran Huu Duc

IRN: 1632309012

BUS 359 – Q2/2021.2022

1. Assume the annual demand for an item is 360 units. The holding cost for it is $4 per unit
per year. The ordering cost is $80 per order.
a. What is the EOQ?
D = 360 S = $80 H = $4

2DS 2*360*80
EOQ = = = 120 (items)
H 4

b. What is the total cost for the inventory policy using EOQ?
TC = Total ordering cost + total holding cost
𝑫∗𝑺 𝑬𝑶𝑸 ∗ 𝑯
= +
𝑬𝑶𝑸 𝟐
𝟑𝟔𝟎 ∗ 𝟖𝟎 𝟏𝟐𝟎 ∗ 𝟒
= +
𝟏𝟐𝟎 𝟐
= $480

c. If demand for this item is 5 units per day, and delivery lead-time is 15 days, what should
we use for a re-order point?
ROP = demand * LT = 5 *15 = 75 (units)

2. A knives company use 50 kg of metal sheets/day. The production is quite standardized and
the supplier is very reliable. The Supplier Lead Time is 2 weeks from the order. Both the
company and the suppier works 6 days a week.
a. What is the Reorder Point?
ROP = demand * LT = 50 * (2*6) = 600 (kg)
b. The knives company decided not to have stock problems anymore. So, they decided to
have a “safety stock” time based. They decided to have 2 weeks of margin on the
stock. What is the new Reorder Point?
ROP = 50*10 + 10*50 = 1000 (kg)

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3. Your store is known for the jeggings on your ecommerce site, you sell 125 pairs of
jeggings every day, on average. The standard deviation for demand is 20 pairs of
jeggings.

From the time you place an order with your jeggings supplier, it takes 15 days for the
product to arrive in your warehouse, on average. The standard deviation for lead time is 5
days. Your brand has set the desired service level to be 95% (z = 1.96) When is the time
for your store to place an order to restock?

d = 125
standard deviation of demand = 20
LT = 15 days
standard deviation of lead time = 5
z = 1.28
→ Standard deviation dLT = 629.78
→ ROP = 2681.12