Given the following MRP matrix for Item C: If each order cost $500 and the holding cost is $0.75 per item per period,then using the Periodic Order Quantity lot sizing technique,the Projected on Hand at the end of period 7 would be
A)330.
B)270.
C)0.
D)140.

Question

Given the following MRP matrix for Item C:  If each order cost $500 and the holding cost is $0.75 per item per period,then using the Periodic Order Quantity lot sizing technique,the Projected on Hand at the end of period 7 would be
A)330. 
B)270. 
C)0. 
D)140.

Quizplus · Accepted Answer

Using the Periodic Order Quantity lot sizing technique, we need to determine the order quantity that meets the demand for the entire period (in this case, 7 periods).

The MRP matrix shows that the total demand for period 1-7 is 350. Therefore, we need to order 350 units to meet the demand.

With an order quantity of 350 units, we will receive the entire order at the beginning of period 7. Therefore, we will have 350 units on hand at the beginning of period 7.

Assuming that there are no previous inventory or backorders, and we sell 50 units during period 7, the projected on-hand inventory at the end of period 7 would be 350 (beginning inventory) - 50 (sales during period 7) = 300.

However, since we have to pay a $500 ordering cost for the order, it would not make sense to order 350 units. In fact, the holding cost for the additional units would be $0.75 x 350 = $262.50, which is higher than the ordering cost.

Therefore, the best choice would be to not order anything and have 0 units on hand at the end of period 7.

Given the Following MRP Matrix for Item C: If