Using the cut-and-try method for aggregate operations planning, we can calculate the ending inventory and then calculate the safety stock as a percent of forecast demand. Suppose that the beginning inventory is 300, the production requirement in units of product is 1,350, demand forecast is 1,500, what is the ending inventory and percent safety stock?

Question

Business

Adolfo Ochoa

11 March, 07:22

Using the cut-and-try method for aggregate operations planning, we can calculate the ending inventory and then calculate the safety stock as a percent of forecast demand. Suppose that the beginning inventory is 300, the production requirement in units of product is 1,350, demand forecast is 1,500, what is the ending inventory and percent safety stock?

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Answers (1)

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Adriana Robertson · Answer 1

Answer: a) Ending inventory is 150 units

b) Percent Safety Stock is 10%

Explanation:

a) The Ending Inventory can as well be calculated using the following,

Ending inventory = Production Requirement + Beginning Inventory - Demand forecast

Plugging in the figures gives us,

= 1350+300-1500

= 150 units

Ending Inventory is 150 units.

b) To calculate the percent safety stock, the following formula can be used,

Safety stock % = Production Requirement - Demand forecast + Beginning Inventory

Safety stock should be a percentage of Demand as the question says. Denoting it as 's' we have,

1500 * (s/100) = 1350-1500+300

15s = 150

s = 10%

The percent safety stock is therefore 10%.