Question

Suppose demand for shovels is as given in the table below. Currently there are 300 shovels on hand. Production is planned by using the lot-for-lot method. The lead time is 3 periods.

Period 1 2 3 4. 5 6
Demand 90 25 130 50 80 100
On-Hand (300 to start)
Net req's
Planned order receipts
Planned order releases
What are the planned order releases in period 3?

О 0
O 175
О 75
O 100

Answer 1

The planned order releases in period 3 are to satisfy the demand in period 6, due to the 3-period lead time. With 300 shovels initially on hand and meeting the demands for periods 1 to 3, the planned order release for period 3 must cover the demand of 100 shovels for period 6.

Step-by-step explanation:

The student is asking about planning the production of shovels using the lot-for-lot (LFL) method, considering the given demand for several periods. With the lead time being 3 periods and initial inventory of 300 shovels, the planned order releases in period 3 need to be calculated to satisfy demand in future periods.

Here's how the calculation works for period 3:

• Period 1 starts with 300 shovels on hand; after the demand of 90 shovels, 210 shovels will remain.
• In Period 2, the remaining 210 shovels will cover the demand of 25, leaving 185 shovels.
• For Period 3, the demand is 130 shovels, so the company will still have 55 shovels after meeting the demand.

Since the lead time is 3 periods, orders placed in Period 3 would be to satisfy demand for Period 6. So, the planned order release in Period 3 is the demand for Period 6, which is 100 shovels.