Exam 16: Inventory Management

The daily sales of a peanut butter at Power's Grocery are normally distributed, with a mean of 12 jars and a standard deviation of 4. The manager checks the inventories on shelves and places an order every three days. Delivery lead time is two days and they carry 21 jars for safety stock. If there are 4 jars on the shelf when an order is placed, how much should the store order?

Dependent demand items are final products demanded by an external customer.

The injection molding department of Alver Inc. uses an average of 40 pounds of a special powder per day. The plant operates 250 days per year. The daily usage of the powder is normally distributed with a standard deviation of 5 pounds per day. The lead time to obtain the powder from a supplier is 9 days. The annual holding cost is $2 per unit and the cost of ordering the powder is $50. -How many units should Alver Inc. order in order to minimize annual ordering and carrying cost?

If order quantity is increased, annual holding cost ________, annual order cost ________, and change in annual total cost ________.

In the basic EOQ model, if D=40 per month, C_o=$9, and C_c=$8 per unit per month, what is the EOQ?

-The slope of the line labeled "B" in the diagram is

Annual demand for notecards at Suzie's Stationery shop is 10,000 units. Deliveries take about 5 working days and Suzie operates 300 days per year. Calculate the reorder point for the notecareds that she stocks.

Kushie's Coffee in Bangalore is a quaint establishment nestled near MG Road in the central business district. It serves coffee and fruit cake to a clientele that has been enjoying these products for over fifty years. The demand for coffee beans is 6600 cases per year (each case has 24 ten-pound bags). It would be disastrous for them to run out of coffee, so they keep a safety stock of 30 cases. The cases cost $4800 and it costs $5 per case to order coffee. As coffee is a perishable product, the holding cost is fairly high at $40/case/year. The lead time to receive an order is seven days. Kushie's is open 300 days a year. -How many orders per year do they place if they order at double their EOQ quantity?

Adding 1.5 standard deviations of safety stock to the average demand during lead time will result in a service level of approximately:

If service level is 50%, then safety stock is equal to 50% of lead time demand.

-The interval labeled "E" in the diagram is

Given an EOQ model with shortages in which annual demand is 4200 units, C_o=$160, C_c=$7 per unit per year and C_s=$25, what is the total minimum annual inventory cost?

A bakery's use of corn syrup is normally distributed with a mean of 50 gallons per day and a standard deviation of 5 gallons per day. Lead time for delivery of the syrup is normal with a mean of 4 days and a standard deviation of 2 days. The manager wants a service level of 99 percent. Calculate the reorder point.

The manager of the Quick Stop Corner convenience store (which is open 360 days per year) sells four cases of Stein soda each day (1440 cases per year). Order costs are $8.00 per order. The lead time for an order is three days. Annual holding costs are equal to $57.60 per case. -What is the optimal order quantity for Stein soda?

-The diagram above represents which type of inventory model?

A bakery uses an average of 60 ounces of organic orange juice daily. Demand is normally distributed with a standard deviation of 15 ounces. The bakery places orders every seven days. The lead time for delivery of the juice is three days. -Compute the safety stock required to achieve a 98% service level.

In a periodic inventory system, a constant amount is ordered when inventory declines to a predetermined level.

In a continuous inventory system, a constant amount is ordered when inventory declines to a predetermined level.

If all of the assumptions for the basic EOQ model are met, the fixed-period model will behave exactly like the EOQ model.

The reorder point is the date when a new order should be placed.