Activity 4.6 - Historic and Forecast demand data Inventory...

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Historic and Forecast demand data Inventory plan calculations Demands for AirWing Model EOQ 68 Month 2000 2001 Forecast For 2002 Safety stock 40 January 6 7 8 February 12 14 15 Reorder point 77 March 24 27 31 April 46 53 59 Inventory plan cost calculations May 75 86 97 Number of orders 6 June 47 54 60 Average inventory 75 July 30 34 39 Total annual cost $1,330.70 August 18 21 24 September 13 15 16 October 12 13 15 $417.89 November 22 25 28 December 38 42 47 Total 343 391 439 Annual demand (D) 439 (Total demand for year 2002) Average demand per month (d) 36.58333 Standard deviation of demand (s) 24.58136 (Data contains entire population, therefore STDEVP() is use (This is the standard deviation of demand during lead time) Cost calculations Retail price of the product $170 Cost to MPBC (C) $102.0 (65% of retail price) Ordering cost (O) $65 Inventory carrying cost rate (I) 1%
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(EOQ = SQRT(2*d*O/I*C) (safety stock = z*standard deviation of demand during lead time) {z for 95% service level is 1.6449, please refer OM book for table) (average demand during lead time + safety stock) (Annual demand/EOQ) (EOQ/2 + safety stock) (Number of orders*ordering cost + average inventory*inventory carrying cost rate*cost to MPC) (This excludes total purchasing cost) ed)
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