Continuous review and periodic review systems

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Reference no: EM133960969

Question

A supermarket chain in Jamaica assessed is inventory data across its various outlets and determined that it is using both the Continuous Review and Periodic Review systems. It's that time of the year when decision are made regarding how many items to order and when should this be done. The following data on one of the independently demanded items is shown below:

Cost of the item = $85

Weekly demand = 90 units

Ordering cost = $55 per order

Holding cost = 5% of item cost

At the time of collecting the data, there were 65 units in stock and 120 units in pipeline

Weekly standard deviation = 9 units

Average stock out for the item = 2%

Lead-time for item = 2 weeks

Number of operating weeks per year = 50 weeks

1. What would be the order quantity (rounded to the nearest integer) under the Continuous Review policy?

2. What would be the average inventory cost under the Continuous Review policy?

3. What is the reorder point under the Continuous Review system?

4. How many units of this item should be ordered under the Periodic Review System?

5. Compare the total costs, inclusive of safety stock, of both the Continuous Review and the Periodic Review systems and state how much (in percentage) is one greater than the other

Reference no: EM133960969

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