Exam 20: Special Inventory Models

A production manager is making a decision on batch size for a product with an annual demand of 25,000 units per year.The setup cost for each batch is $45 and once the setup is complete,the product may be produced at the rate of 650 units per day.There is a holding cost of $2 per unit per year and the plant operates on a 250-day production year.How big should the production batch be and how long (in days)will it take to produce the batch?

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario D.1.If Jerry chooses to produce the batch size suggested by the economic production lot size (ELS)model,what is the annual cost?

Which of these statements about the one-period model is best?

As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 1,000 units.Ordering costs are $50 each time an order is placed,and the holding cost is 25 percent of the per-unit price.Your supplier provided the following price schedule. Quantity Price per Unit 1-199 \ 10.00 200-499 \ 9.80 500 or more \ 9.60 What ordering-quantity policy do you recommend?

Briefly explain why the economic production lot size (ELS)is actually larger than the EOQ when there are noninstantaneous replenishments.

Kyle store sells K2 skis. The store makes a $200 profit per unit sold during the ski season, but it should take a $50 loss per unit if sold after the season is over. The following discrete probability distribution has been estimated for the season's demand. Demand (D) Demand Probability 10 0.1 20 0.3 30 0.3 40 0.2 50 0.1 -Use the information in Scenario D.2..What is the best order quantity?

The ________ is the optimal lot size in situations in which replenishment is not instantaneous.

Consider an item with the following discrete demand distribution for a one-time inventory decision. Demand (D) Demand Probability 10 0.15 20 0.20 30 0.30 40 0.20 50 0.15 This item experiences a seasonal demand pattern. A profit of $15 per unit is made if the item is sold in season, but a loss of $10 per unit is incurred if sold after the season is over. -Use the information in Scenario D.3.What is the order quantity with the highest expected payoff?

A production manager uses the economic lot size approach to determine the batch size for a product with an annual demand of 20,000 units per year.The setup cost for each batch is $50 and once the setup is complete,the product may be produced at the rate of 800 units per day.There is a holding cost of $2 per unit per year and the plant operates on a 250-day production year.If the machine used to produce this product is needed for another item and it takes one day to set up regardless of product,how many production days are available for production of the new item?

When do one-period decisions on inventory arise in practice?

When facing quantity discounts,the EOQ found with the lowest price level is the lowest total cost plan.

Warren's Ice Cream makes 4 different flavors of ice cream using their secret process and top secret recipes.Each of their flavors is equally popular and experiences a demand of 5000 gallons/year.Warren's process is capable of producing 100 gallons/day once they incur the $25 setup cost.The ice cream holding cost is 10% of the $5 per gallon price.Warren's plant runs 250 days a year and stays busy doing so but management feels they can add another flavor to their product line and increase their revenue.Which of the following statements is appropriate for this scenario?

A newsstand is trying to determine how many bundles of newspapers to stock.For each bundle,the newsstand makes $20.However,they lose $5 per bundle if they do not sell.The following discrete probability distribution has been estimated for their daily demand.How many bundles should they stock? Demand (bundles) Probability 4 .10 5 .20 6 .30 7 .30 8 .10