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 Planned Order Release for period 4 would be
A)270
B)290
C)340
D)560

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 Planned Order Release for period 4 would be
A)270 
B)290 
C)340 
D)560

Quizplus · Accepted Answer

To calculate the Planned Order Release for period 4 using the Periodic Order Quantity lot sizing technique, we need to follow the following steps:

1. Calculate the Total Gross Requirements (TGR) for each period by summing up the gross requirements for each period from the MRP matrix. TGR for period 4 is 370.

2. Calculate the Total Net Requirements (TNR) for each period by subtracting the scheduled receipts (if any) from the TGR for each period. TNR for period 4 is 290 (TGR for period 4 minus 80 scheduled receipts for period 4).

3. Calculate the Order Quantity (Q) by multiplying the TNR for the period with the number of periods between two consecutive orders. The number of periods between two consecutive orders is the same as the order interval, which is 3 periods in this case. Q for period 4 is (290 x 3) = 870.

4. Calculate the Planned Order Release (POR) for the period by subtracting the beginning inventory from the Q. The beginning inventory for period 4 is 230 (ending inventory of 640 for period 3 becomes the beginning inventory for period 4). POR for period 4 is (870 - 230) = 640.

Therefore, the Planned Order Release for period 4 is 290, and the best choice is B.

Given the Following MRP Matrix for Item C