Exam 12: Inventory Control Models

A local post office uses 10,000 boxes a year.Carrying costs are 15 cents per box a year,and ordering costs are $20 per order.The following price schedule applies.What is the optimal order quantity? Number of Boxes Price per Box 0-199 \ 1.50 200-299 \ 1.25 300-399 \ 1.10 400 or more \ 1.00

In a quantity discount model,the choice of order quantity must be the EOQ.

Use this information to answer the following questions. A cake factory can produce cakes at the rate of 500 per day.The factory supplies its cakes to local grocery stores at a rate of 250 per day.The cost to prepare the equipment for producing the cakes is $20.Annual holding costs are $2 per cake.Assume that the factory operates 250 days a year. -Refer to the information above.What are the total annual setup and holding costs?

The Z-value for a desired service level of 0.95 is ________.

Use this information to answer the following questions. A bakery buys sugar in 15-pound bags.The bakery uses 5000 bags of sugar each year.Carrying costs are $20 per bag per year.Ordering costs are estimated at $5 per order.Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags.It takes 5 days for each order of sugar to be filled. -Refer to the information above.What is the Reorder point (ROP)?

The average inventory level is inversely/negatively related to order size.

The EPQ model is primarily concerned with the timing of orders.

A small toy store has organized its 10 inventory items on an annual dollar-volume basis.The information below shows the items,their annual demands,and unit costs.How should the store classify these items into groups A,B,and C? $\begin{array} { l c c } \text { Item Number } & \text { Annual Volume(Units) } & \text { Unit Cost (\$) } \\ \text { Item 1 } & 300 & \$ 10 \\\text { Item } 2 & 1000 & \$ 30 \\\text { Item } 3 & 500 & \$ 60 \\\text { Item } 4 & 100 & \$ 2 \\\text { Item } 5 & 1500 & \$ 20 \\\text { Item } 6 & 600 & \$ 50 \\\text { Item } 7 & 2000 & \$ 1.50 \\\text { Item } 8 & 900 & \$ 70 \\\text { Item } 9 & 1200 & \$ 2.00 \\\text { Item } 10 & 700 & \$ 40\end{array}$

The Economic Order Quantity (EOQ)formula assumes that all input data are known with certainty.

Use this information to answer the following questions. A bakery buys sugar in 15-pound bags.The bakery uses 5000 bags of sugar each year.Carrying costs are $20 per bag per year.Ordering costs are estimated at $5 per order.Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags.It takes 5 days for each order of sugar to be filled. -Refer to the information above.What are the total annual holding costs?

Quantity discounts give customers a price incentive to buy in larger quantities.

A grocery store is aiming for a 95% service level for 1 gallon bottles of whole milk.The mean demand during lead time is 200 with a standard deviation of 40.Milk has a carrying cost of $0.50 per unit per year.How much safety stock should the grocery store maintain in milk and what is the reorder point?

In the ABC analysis,the A group items are the least critical.

In the Economic Order Quantity (EOQ)model,the maximum amount of inventory held in a given cycle is the optimal order quantity Q*.

Loss of goodwill must be included in stockout costs.

Use this information to answer the following questions. A bakery buys sugar in 15-pound bags.The bakery uses 5000 bags of sugar each year.Carrying costs are $20 per bag per year.Ordering costs are estimated at $5 per order.Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags.It takes 5 days for each order of sugar to be filled. -Refer to the information above.What is the optimal number of orders per year?

Processing and inspecting incoming inventory are considered ordering cost factors.

Use this information to answer the following questions. A bakery buys sugar in 15-pound bags.The bakery uses 5000 bags of sugar each year.Carrying costs are $20 per bag per year.Ordering costs are estimated at $5 per order.Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags.It takes 5 days for each order of sugar to be filled. -Refer to the information above.What is the maximum inventory held in a given EOQ cycle?

A local ice cream shop sells 10,000 cones of vanilla-flavored ice cream each year.The cones are ordered from an outside supplier and it takes 5 days for each shipment of cones to arrive.Ordering costs are estimated at $15 per order.Carrying costs are $5 per cone per year.Assume that the ice cream shop is open 250 days a year. a.What is the optimal EOQ for ice cream cones? b.What is the total cost of ordering and carrying the ice cream cones? c.What is the maximum inventory of cones held in a given ordering cycle? d.What is the average inventory held in a given ordering cycle? e.What is the reorder point (ROP)?