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 L4L ordering is used the planned order releases is
A) 40 in period 1 and 0 in period 3
B) 80 in period 2 and 60 in period 3
C) 60 in period 2 and 80 in period 3
D) 0 in period 1 and 40 in period 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 L4L ordering is used the planned order releases is
A) 40 in period 1 and 0 in period 3 
B) 80 in period 2 and 60 in period 3 
C) 60 in period 2 and 80 in period 3 
D) 0 in period 1 and 40 in period 3

Quizplus · Accepted Answer

To determine the planned order releases using L4L ordering, we need to calculate the net requirements and the time-phased order quantity.

The net requirements for Item F are:

Period 1: 40
Period 2: 100
Period 3: 60

The time-phased order quantity for L4L ordering is equal to the net requirements in each period. Therefore:

Period 1: 40
Period 2: 100 - 40 = 60
Period 3: 60

Therefore, the planned order releases for L4L ordering are:

Period 1: 40
Period 2: 80
Period 3: 60

A Firm Has the Following Gross Requirements for Item F