ITPEC IP October 2020 Question 67

Topic: Business Industry

When the planned production quantity of Product A and the total required quantity and the inventory quantity of Component B are as shown in the table below, what is the minimum order placement quantity I of Component B required in Week 2?

[Conditions]•The lead time (the period from the start of work until the completion of work) for Product A is ignored.•Two (2) of Component B are required for the production of one (1) of Product A, and Component B is only used for the production of Product A.•An order for Component B is placed after the end of production each week, and it is delivered before the start of production in the next week.•The safety stock for Component B is 25% of the total required quantity of Component B for the relevant week.•The inventory quantity of Component B before the start of production in Week 1 is 100.
Unit: Number of products/componentsWeek 1Week 2Week 3Planned production quantity of Product ATotal required quantity of Component BInventory quantity of Component B(After end of production)Order placement quantity of Component B atthe end of production40402080804020INote: The content of the shaded portion is not shown.

Explanation

30 — before each week's production the stock of Component B must cover that week's requirement plus a safety stock of 25% of it, and the order placed at the end of Week 2 fills Week 3's gap.

  • •Week 1: 100 − 80 = 20 left, which matches the table and equals the safety stock 80 × 0.25 = 20
  • •End of Week 1: Week 2 needs 80 + 20 = 100; order 100 − 20 = 80
  • •Week 2: 100 − 80 = 20 left after production
  • •End of Week 2: Week 3 needs 40 + 40 × 0.25 = 40 + 10 = 50; order I = 50 − 20 = 30

Answer (a)

Why not others:

  • •(b) 40 — orders Week 3's requirement in full, ignoring both the 20 already in stock and the safety stock of 10
  • •(c) 60 — would put 80 in stock at the start of Week 3, 30 more than the 50 needed, so it is not the minimum
  • •(d) 80 — is the order placed at the end of Week 1 for Week 2's production of 40 products, not the order for Week 3

Key rule: Order quantity = next period's requirement + required safety stock − stock left over; compute it for the period the order will be used in.

Business Industry · AI-written, may contain errors

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