The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the length of an order cycle?
A)0.48 days
B)2.08 days
C)6 days
D)8.4 days
E)14.4 days

Question

Quizplus · Accepted Answer

The order cycle length is calculated by dividing the order quantity by the average daily demand. With 12,500 bills dispensed per month, the daily demand is 12,500/30 = 416.67 bills per day. Ordering 6,000 bills at a time, the cycle length is 6,000/416.67 ≈ 14.4 days.

The Operations Manager for Shadyside Savings & Loan Orders Cash