There was an ending balance of 169,000 tablets of chlorpropamide 250 mg. The lead time is ninety days, the total consumption for the past six months was 162,000 tablets, and the procurement period is six months. No stock out period. Based on the information given above, calculate the following
1: Average monthly consumption.
2: Safety stock.Quantity to order (packs).
3: Total costs.
(N.B: pack size= 1,000; use adjustment= probable pack price= 27.90 USD)
1: Average monthly consumption
Average monthly consumption = Total consumption for the past six months / 6
= 162,000 tablets / 6 months
= 27,000 tablets per month
2: Safety stock quantity to order (packs)
Lead time demand = Average monthly consumption x lead time
= 27,000 tablets x 3 months (90 days)
= 81,000 tablets
Safety stock = Maximum consumption during lead time - (Ending balance + Safety stock already on hand)
= 81,000 tablets - (169,000 tablets + 0)
= 81,000 tablets - 169,000 tablets
= -88,000 tablets
Since there is no stock out period, the safety stock quantity to order would be 0 packs.
3: Total costs
Total costs = (Safety stock quantity to order x pack price) + (Lead time demand x pack price)
= (0 packs x 27.90 USD) + (81 packs x 27.90 USD)
= 0 USD + 2,255.90 USD
= 2,255.90 USD
Therefore, the total costs would be 2,255.90 USD.