Answer:
Explanation:
To calculate the reorder level of component X, we need to find out the average weekly consumption of X.
Average consumption of X per unit of 'RED' = 0.4 kg
Average weekly production of 'RED' = 400 units
Average weekly consumption of X for producing 400 units of 'RED' = 0.4 kg/unit x 400 units/week = 160 kg/week
Assuming lead time of 3 weeks for delivery of X, the reorder level of X would be:
Reorder level of X = Average weekly consumption of X x Lead time for delivery of X
Reorder level of X = 160 kg/week x 3 weeks = 480 kg
To calculate the maximum level of X, we need to take into account the economic order quantity and the maximum storage capacity.
Economic order quantity of X = Square root of [(2 x Annual consumption of X x Ordering cost per order) / Cost per unit of X]
Assuming 52 weeks in a year:
Annual consumption of X = Average weekly consumption of X x 52 weeks/year = 160 kg/week x 52 weeks/year = 8,320 kg/year
Ordering cost per order of X = 600
Cost per unit of X = 1
Economic order quantity of X = Square root of [(2 x 8,320 kg x 600) / 1] = 2,771.28 kg (approx.)
Maximum storage capacity of X = Economic order quantity of X + Safety stock - Average weekly consumption x Maximum lead time
Assuming a safety stock of 20% of the economic order quantity and a maximum lead time of 3 weeks:
Maximum storage capacity of X = 2,771.28 kg + (0.2 x 2,771.28 kg) - (160 kg/week x 3 weeks) = 2,815.82 kg (approx.)
To calculate the maximum level of Y, we follow the same approach as for X:
Annual consumption of Y = Average weekly consumption of Y x 52 weeks/year
Average consumption of Y per unit of 'RED' = 0.6 kg
Average weekly consumption of Y for producing 400 units of 'RED' = 0.6 kg/unit x 400 units/week = 240 kg/week
Annual consumption of Y = 240 kg/week x 52 weeks/year = 12,480 kg/year
Economic order quantity of Y = Square root of [(2 x Annual consumption of Y x Ordering cost per order) / Cost per unit of Y]
Ordering cost per order of Y = 1,000
Cost per unit of Y = 1.5
Economic order quantity of Y = Square root of [(2 x 12,480 kg x 1,000) / 1.5] = 915.65 kg (approx.)
Maximum storage capacity of Y = Economic order quantity of Y + Safety stock - Average weekly consumption x Maximum lead time
Assuming a safety stock of 20% of the economic order quantity and a maximum lead time of 3 weeks:
Maximum storage capacity of Y = 915.65 kg + (0.2 x 915.65 kg) - (240 kg/week x 3 weeks) = 732.52 kg (approx.)