Exam 14: Inventory Models

The Tiernan Gallery and Art Museum distributes to its visitors a printed guide to its collections.There are about 18000 visitors per year.Holding costs for the brochures are 20% and it costs $30 to place an order with the printer.The printer has offered the following discount schedule: ​ Category Order Size Unit Cost 1 0-1499 \ 2.50 2 1500-2999 \ 2.20 3 3000 and over \ 1.80 How many brochures should be printed at a time?

The time between placing orders is the lead time.

A firm is presently using the basic EOQ model and is considering switching to the economic production lot size model.If everything else stays the same,what change should the firm expect?​

​What could be meant by service level? Why is a clear understanding of this term important?

An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

If the optimal production lot size decreases,average inventory increases.

Which cost would not be considered part of a holding cost?

The definition of service level used in this chapter is

The terms "inventory on hand" and "inventory position" have the same meaning.

When there is probabilistic demand in a multi-period model,the inventory level will not decrease smoothly and can fall below 0.

A gourmet food store uses a one-week periodic review system for its supply of coffee beans.There is a five-day lead time for orders,and the store will allow two stockouts per year. a.What is the probability of a stockout associated with each replenishment decision? b.What is the replenishment level if demand during the review and lead-time periods is normally distributed with mean 120 pounds and standard deviation 8 pounds? c.How many pounds of beans should be ordered if there are 42 pounds of beans on hand?

Kellam Images prints snack food bags on long rolls of plastic film.The plant operates 250 days a year.The daily production rate is 6000 bags,and the daily demand is 3500 bags.The cost to set up the design for printing is $300.The holding cost is estimated at 2 cents per bag. a.What is the recommended production lot size? b.If there is a five-day lead time to set up the line,what is the recommended reorder point?

If an item's per-unit backorder cost is greater than its per-unit holding cost,no intentional shortage should be planned.

The Fitness Shop is considering ordering a special model exercise machine.Each unit will cost the shop $410 and it will sell for $750.Any units not sold at the regular price will be sold at the year-end model clearance for $340.Assume that demand follows a normal probability distribution with μ = 20 and σ = 6.What is the recommended order quantity?

Which of the following is not implied when average inventory is Q/2,where Q is the order quantity?

​Derive and explain the total cost expression for the EOQ model.

Demand for a popular athletic shoe is nearly constant at 800 pairs per week for a regional division of a national retailer.The cost per pair is $54.It costs $72 to place an order,and annual holding costs are charged at 22% of the cost per unit.The lead time is two weeks. a.What is the EOQ? b.What is the reorder point? c.What is the cycle time? d.What is the total annual cost?

The risk of a stockout is the complement of​

A lawn and garden shop that is open for business seven days a week orders bags of grass seed every OTHER Monday.Lead time for seed orders is 5 days.On Monday,at ordering time,a clerk found 112 bags of seed in stock,and so he ordered 198 bags.Daily demand for grass seed is normally distributed with a mean of 15 bags and a standard deviation of four bags. The manager would like to know what the probability is that a grass seed stockout will occur before the next order arrives.

Show the total cost expression and calculate the EOQ for an item with holding cost rate 18%,unit cost $8.00,annual demand of 40000,and ordering cost of $48.