Reorder Point

Reorder Point - Reorder Point Safety Stock Reorder Point w/...

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Reorder Point 1 Safety Stock protects the firm from running out of inventory if sales are not stable or the production or delivery times are Reorder Point w/ Safety Stock and Delivery Time
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Incorporating Quantity Discounts 2 Now we will weave in quantity discounts. It must be determined if the discount for volume orders TC = Order Cost + Holding Cost + Item Cost TC = [ F х ( T/Q ) ] + [ H х ( Q /2) ] + (C’ х T) New T = Total inventory units demanded Q = Order quantity F = Fixed Order
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Incorporating Quantity Discounts 3 Before, there was no discount offered, and the EOQ was 4,000 at $0.50/unit; with the discount, it is now 5,000. Period Inventory Requirement 500000 Ordering Costs $20.00 Per Order Holding Costs $1.25 Per Ton 0 - 999 $0.50 500 $270,313 $20,000 $313 $250,000 1,000 - 2,999 units $0.48 1000 $250,625 $10,000 $625 $240,000 3,000 - 4,999 units $0.45 1500 $247,604 $6,667 $938 $240,000 5,000+ units $0.40 2000 $246,250 $5,000 $1,250 $240,000 2500
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This note was uploaded on 01/19/2012 for the course FIN 4260 taught by Professor Victorwakeling during the Spring '12 term at Kennesaw.

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Reorder Point - Reorder Point Safety Stock Reorder Point w/...

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