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(Tierman Gallery Part A) The Tierman Gallery distributes to its visitors a brochure to its collections. There are about 20800 visitors per year. The unit cost is $2, the holding cost for a brochure is 10% of the unit cost and it costs $30 to place an order. The unit time is 1 week and it takes 2 weeks till printed brochures are delivered. [OQ] (Tierman Gallery Part A) Tierman should place an order when the on-hand inventory reaches ___.

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Answer:

TIERMAN SHOULD PLACE AN ORDER WHEN THE ON HAND INVENTORY REACHES: C. 800

Explanation:

Annual demand (i.e. Number of visitors) = D = 20800

Ordering cost = F = $30

Unit holding cost = C = 10% of $2 /unit = $0.2 / unit

Weekly demand of visitors = Annual demand of visitors/ 52 weeks = 20800/ 52 = 400

Lead time for delivery of brochure = L = 2 weeks

Therefore, Reorder point = Weekly demand x Lead time (weeks) = 400 x 2 = 800

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