Average time that a part spends in on-hand inventory

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Reference no: EM131703155

Each year, Sherwin-Williams resells 20,000 cans of paint primer, which it purchases from a supplier for $1 per can. Each time Sherwin-Williams places an order, it incurs a ?xed cost of $100 for processing. Assume that the EOQ conditions hold, and that Nivek’s believes that un?lled orders can be backlogged (and ?lled at a later date) at a cost of $2 per can per month. Suppose also that the annual holding cost for surplus inventory is $4.80 per unit. Assume that, when a new shipment arrives from its supplier, Sherwin-Williams can ?ll backorders immediately:

(a) Determine the average time that a demand waits to be ?lled. [Including demands that are ?lled instantaneously.]

(b) Determine the average time that a part spends in on-hand inventory. [Including parts that spend time 0 in on-hand inventory.]

Reference no: EM131703155

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