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Gowon Corporation: Practice Problem 1
Gowon Corporation: Practice Problem 1
Practice Problem 1
Gowon Corporation has the following data available for its Material AO#4:
REQUIRED:
Safety Stock Quantity (time) = (Maximum lead time - Normal lead time) x normal usage
= (15 days - 8 days) x 511 units
= 3,511 units
C. Reorder point
D. Average inventory
E. Maximum inventory
c. Reorder point
Reorder point = Lead time quantity + Safety stock quantity
= 4,111 units + 4,311 units
Reorder point = 8,311 units
d. Average inventory
Average Inventory = (Economic Order Size/ 2) + Safety Stock
= (9,111 units/2) +4,311
Average Inventory = 8,811 units
e. Maximum inventory
Maximum Inventory = Maximum Usage per day x Maximum Lead Time + Safety stock
= (611 units x 15 days) + Safety Stock
Maximum Inventory= 9,111 units