Exam 16: Inventory Management

The economic production quantity is 500 units (units are delivered to the user department as they come off the production line). If the firm decides to buy this item from an outside supplier rather than producing it, the economic purchase quantity would probably be (assume that inventory costs of production and purchasing an item are the same):

Carrying costs include storage cost, interest, and depreciation.

Annual demand for a paperback dictionary at the bookstore is 1200 units. Ordering costs are 350, carrying costs are $6 per unit per year, and the lead time is 9 days. The bookstore is open for 300 days of the year. What is the reorder point?

The noninstantaneous receipt model applies only to manufacturing.

A ________ occurs when an item is out of stock and is sold to the customer when a shipment arrives.

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. -If there are four jars on the shelf when an order is placed, how much should the store order?

Ordering costs include transportation, shipping, and inspection.

A company distributes repair parts for high-end appliances. The annual demand is 81,000 and the company operates 300 days per year. The annual carrying cost is 20% of the item cost, which is $500. The ordering cost is estimated at $60 and the shortage cost is $150. -What is the maximum inventory level?

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

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 reorder point for Stein soda?

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. -In a noninstantaneous receipt model, daily demand is 55 units and daily production is 120 units, C_o=$70 and C_c=$4 per unit/year. The production facility operates 300 days per year. What is the maximum inventory level?

If demand per day or lead time are not constant, then the reorder point must include a level of inventory called ________.

A product has an annual demand of 3600 units. Unit cost for this product is $3. Set up cost is $20 and the inventory carrying rate as a percent of the unit cost is 25%. The product is produced in-house where the daily production rate is 50 units. Assume 360 working days per year and determine the economic production quantity.

If a business frequently runs out of inventory, their service levels are negative.

________ demand items are generally final products demanded by customers.

A company produces item Y, and uses the basic EOQ model for managing its inventory. Lead time to obtain item Y is two weeks. Demand is normally distributed with a mean of 400 units per week and a standard deviation of 40 units per week. The desired service level is 98.5%. The ordering cost is $20, and carrying cost is 20% of the items cost, which is $10. -Determine the order quantity for product Y. (Assume 52 weeks of operation per year.)

If average demand for an inventory item is 180 units per day, lead time is 5 days, and safety stock is 90 units, what is the reorder point?