A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period. If the periodic order quantity lot sizing rule is used, the number of period's worth of requirements is
A) 0.
B) 1.
C) 2.
D) 3.

Question

A firm has the following gross requirements for Item F. If ordering costs are $60 per order and carrying costs are $0.50 per period.  If the periodic order quantity lot sizing rule is used, the number of period's worth of requirements is
A) 0. 
B) 1. 
C) 2. 
D) 3.

Quizplus · Accepted Answer

To determine period's worth of requirements, we need to find the total demand for the year and divide it by the demand in one period.

Total demand = 1000 + 800 + 1200 + 600 = 3600

Let's assume that the demand is evenly distributed over the year, so demand in one period = 3600/4 = 900

Now, we need to determine the economic order quantity (EOQ) using the given data.

EOQ = sqrt(2DS/H) = sqrt((2*60*3600)/0.5) = 1200

Since the periodic order quantity lot sizing rule is used, the order quantity will be equal to EOQ, i.e., 1200.

The number of periods worth of requirements is equal to the order quantity divided by the demand in one period, i.e., 1200/900 = 1.33

Rounding up to the nearest whole number, we get 2 periods worth of requirements. Therefore, the best choice is C.

A Firm Has the Following Gross Requirements for Item F