How many chairs should rfc order each time

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Reference no: EM133985756

Assignment:

RajDee Furniture Company (RFC) buys and sells office furniture. The company buys chairs from a manufacturer for $50 for each chair. The manufacturer delivers chairs to RFC and bears the delivery costs of $150 per shipment. Each time of ordering, RFC needs to spend $200 per order in paper work and inspection. On average, there is a lead time of 10 days for each order to arrive from the manufacturer to RFC warehouse. Inventory carrying/holding cost for RFC is 8%. Average yearly demand for the chairs is 40,000 units.

Answer the following questions, assuming there is no uncertainty at all about the demand.

(a) How many chairs should RFC order each time?

(b) Now the average lead time went up from 10 to 12 days, how should RFC change the order quantity and the reorder point of chairs: increase, decrease, or stay the same, and why?

(c) On top of the order quantity and reorder point as mentioned in (b), discuss the impact of the longer average lead time on RFC's logistics and supply chain.

(d) Without doing calculation, how should RFC change the order quantity: increase, decrease, or stay the same, if each of the following situations happen, assuming all others hold?

a. The average yearly demand for the chairs increases to 45,000 units

b. Each time of ordering, the amount that RFC needs to spend per order in paper work and inspection increases to $250.

Reference no: EM133985756

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