Operations managements, please check/correct my work

Q3) A manager must set up inventory ordering systems for two new

production items, P34 and P35. P34 can be ordered at any time, but P35
can

only be ordered once every four weeks. The company operates 50 weeks a

year, and the weekly usage rates for both items are Normally
distributed. The

manager has gathered the following information about the item:

Item P34 Item P35

Average weekly demand 60 units 70 units

Standard deviation 4 units per week 5 units per week

Unit cost $15 $20

Annual holding cost 30% 30%

Ordering cost per order $70 $30

Lead time 2 weeks 2 weeks

Acceptable stock outs risk 2.5 % 2.5%

a. When should the manager reorder P34?

b. Compute the order quantity for P 34?

c. Computer the order quantity for P35 if 110 units are on hand at the
time

the order is placed.

Answer to Question 3

Average weekly demand = 60 units

) = 8.6 units

Avg yearly demand (D) = 3000 units

Standard deviation (SD) = 4 units/week

Unit cost = $15

Holding cost (H) = $4.50

Ordering cost (S) = $70

Lead Time (L) = 14 days

Stock outs risk = 97.5 (z) = 1.95



( 15

( 8.6(14) + 1.95(15) = 149.65 ( 150

( (2)(3000)(70) / 4.50 ( 305.5 ( 306

When inventory drops to 150, order 306 units

c)

Weekly Demand = 70 units

) = 10 units

Avg yearly demand (D) = 3500 units

Standard deviation (SD) = 5 units/week

Unit Cost

Holding cost (H) = $6

Ordering cost (S) = $30

Lead Time (L) = 14 days

Stock outs risk = 97.5 (z) = 1.95

Ordered every 28 days, 110 units on hand at order time



( 32.4

= (1.95) 32.4 ( 63.2

q= 10(28+14) + 63.2 - 110 = 373

Order 373 units at the review period