Exam 12: Inventory Management

The Rushton Trash Company stocks,among many other products,a certain container,each of which occupies four square feet of warehouse space.The warehouse space currently available for storing this product is limited to 600 square feet.Demand for the product is 15,000 units per year.Holding costs are $4 per container per year.Ordering costs are $5 per order. (a)What is the cost-minimizing order quantity decision for Rushton? (b)What is the total inventory-related cost of this decision? (c)What is the total inventory-related cost of managing the inventory of this product,when the limited amount of warehouse space is taken into account? (d)What would the firm be willing to pay for additional warehouse space?

When quantity discounts are allowed,the cost-minimizing order quantity:

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car.Daily paper sales are normally distributed,with a mean of 100 and standard deviation of 10.He sells papers for $0.50 and pays $0.30 for them.Unsold papers are trashed with no salvage value.How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?

A local artisan uses supplies purchased from an overseas supplier.The owner believes the assumptions of the EOQ model are met reasonably well.Minimization of inventory costs is her objective.Relevant data,from the files of the craft firm,are annual demand (D)=150 units,ordering cost (S)= $42 per order,and holding cost (H)= $4 per unit per year a.How many should she order at one time? b.How many times per year will she replenish her inventory of this material? c.What will be the total annual inventory (holding and setup)costs associated with this material (rounded to the nearest dollar)? d.If she discovered that the carrying cost had been overstated,and was in reality only $1 per unit per year,what is the corrected value of EOQ?

In the basic EOQ model,if D = 6000 per year,S = $100,and holding cost = $5 per unit per month,what is the economic order quantity?

What is MRO an acronym for? What is the function of MRO inventories?

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below,the average amount of inventory on hand: Q* =

Louisiana Specialty Foods can produce its famous meat pies at a rate of 1650 cases of 48 pies each per day.The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day.The cost of setup,cleanup,idle time in transition from other products to pies,etc. ,is $320.Annual holding costs are $11.50 per case.Assume 250 days per year. (a)Determine the optimum production run (batch size). (b)Determine the number of production runs per year. (c)Determine maximum inventory. (d)Determine total inventory-related (setup and carrying)costs per year (rounded to the nearest dollar).

The fixed-period inventory model can have a stockout during the review period as well as during the lead time,which is why fixed-period systems require more safety stock than fixed-quantity systems.

Consider a product with a daily demand of 400 units,a setup cost per production run of $100,a monthly holding cost per unit of $2.00,and an annual production rate of 292,000 units.The firm operates and experiences demand 365 days per year.Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the production order quantity model.How much money per year has that mistake cost the company?

Which of the following statements regarding Amazon.com is FALSE?

Most inventory models attempt to minimize:

Which of the following is an element of inventory holding costs?

Consider the all-units quantity discount schedule below. Which of the following sets of order quantities is guaranteed to contain the optimal solution (i.e. ,best order quantity)?

Which of the following would NOT generally be a motive for a firm to hold inventories?

In ABC analysis,"A" items are the most tightly controlled.

The EOQ model is best suited for items whose demand is dependent on other products.

The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers.Mean demand during lead time is 170 trimmers,and the standard deviation during lead time is 60 trimmers.The annual cost of carrying one trimmer in inventory is $6.The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer)if the service level were increased to 99%.Is it worthwhile for Winfield to make this change?

Pointe au Chien Containers,Inc. ,manufactures in batches,and the manufactured items are placed in stock.Specifically,the firm is questioning how best to manage a specific wooden crate for shipping live seafood,which is sold primarily by the mail/phone order marketing division of the firm.The firm has estimated that carrying cost is $4 per unit per year.In addition,annual demand = 60,000 units,and setup cost is $300.The firm currently plans to satisfy all customer demand from stock on hand.Demand is known and constant.The production rate is nearly instantaneous. a.What is the cost minimizing size of the manufacturing batch? b.What is the total annual holding and setup cost of this solution?

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division.Perform ABC analysis on the data.Which products do you suggest the firm keep the tightest control over? Explain.