Question

Prince​ Electronics, a manufacturer of consumer electronic​ goods, has five distribution centers in different regions of the country. For one of its​ products, a high speed modem priced at ​$370 per​ unit, the average weekly demand at each distribution center is 75 units. Average shipment size to each distribution center is 350 ​units, and the average lead time for delivery is 2 weeks. Each distribution center carries 2 ​weeks' supply as safety stock but holds no anticipation inventory.(a) On average, how many dollars of pipeline inventory will be in transit to each distribution center?(b) How much total inventory (cycle, safety, and pipeline) does Prince hold for all five distribution centers?

Answer 1

Answer:

(a) $55,500

(b) 2,375

Explanation:

As per the data given in the question,

a)

Cycle inventory = Average demand × lead time

= 75 × 2

= 150 units

Value of cycle inventory = 150 units × price

= 150 × $370

= $55,500

b)

Cycle inventory to each distribution center = 350 ÷ 2

= 175

Safety stock for each distribution center = Avg weekly demand × 2 weeks

= 75×2

= 150 units

Total inventory = Cycle inventory + pipeline inventory + safety stock

= 175+150+150

= 475 units

Total inventory for all 5 distribution center = 475×5

= 2,375