Exam 13: Inventory Management

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. What is the economic order quantity for pepperoni?

Cycle counting can be used in motorcycle inventory control.

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. What is the economic order quantity?

In a two-bin inventory system, the amount contained in the second bin is equal to the:

The two main concerns of inventory control relate to the costs and the level of customer service.

In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

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. If she were to order 6,000 bills at a time, what would be the dollar value of the average inventory level?

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves:

In the fixed-order-interval model, the order size is the same for each order.

Cycle stock inventory is intended to deal with:

The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.

The basic EOQ model ignores the purchasing cost.

Which of the following interactions with vendors would potentially lead to inventory reductions?

In the basic EOQ model, if annual demand doubles, the effect on the EOQ is:

The operator of a concession at a downtown location estimates that he will sell 400 bags of circus peanuts during a year. Carrying costs are 17 percent of unit price, and ordering cost is $22. The price schedule for bags of peanuts is: 1 to 199, $1.00 each; 200 to 499, $.94 each; and 500 or more, $.87 each. What order size would be most economical? D = 400 bags per year S = $22 H = .17P

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the average inventory level?

Given the following data for a particular inventory item: Usage 500 units/week Ordering \ 40 per order Carrying Cost \ .01 per unit per week Lead Time 3 weeks Price \ .50 per unit For the economic order quantity, what are average weekly ordering costs?

Safety stock eliminates all stockouts.

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, at what point should bills be reordered?

In the single-period model, the service level is the probability that demand will not exceed the stocking level in any period.