Solution-What level of safety stock should the materials

What level of safety stock should the materials and parts

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Reference no: EM132507307

Point 1: Fiber Technology, Inc., manufactures glass fibers used in the communications industry. The company's materials and parts manager is currently revising the inventory policy for XL-20, one of the chemicals used in the production process. The chemical is purchased in 10-pound canisters for $109 each. The firm uses 7,000 canisters per year. The controller estimates that it costs $164 to place and receive a typical order of XL-20. The annual cost of storing XL-20 is $5.40 per canister.

Point 2: Now also assume that the lead time required to receive an order of XL-20 is one month.

Required:

Question 1: Assuming stable usage of XL-20 each month, determine the reorder point for XL-20.

Question 2: Suppose that monthly usage of XL-20 fluctuates between 483 and 683 canisters, although annual demand remains constant at 7,000 canisters. What level of safety stock should the materials and parts manager keep on hand for XL-20? What is the new reorder point for the chemical?

Reference no: EM132507307

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What level of safety stock should the materials and parts

Reference no: EM132507307

Reference no: EM132507307

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