Exam 18: Special Inventory Models

Which of these statements about the one-period model is BEST?

A newsstand is trying to determine how many bundles of newspapers to stock.For each bundle,the newsstand makes $20.However,they lose $5 per bundle if they do not sell.The following discrete probability distribution has been estimated for their daily demand.How many bundles should they stock?

Walter White must satisfy an annual demand of 50,000 pounds per year.The setup cost for each batch is $6500 and once the setup is complete,the product may be produced at the rate of 1800 pounds per day.There is a holding cost of $15 per unit per year and the plant operates on a 350-day production year.How big should the production batch be and how long (in days)will it take to produce the batch?

Which one of the following statements about quantity discounts is BEST?

In a one-period inventory model,the more profitable the item during the sales season,the manager should place a higher order at the start of the season.

In a one-period inventory model,the after-season sales price may be zero.

For analysis using the economic production lot size (ELS)model to be useful,the producer must be able to produce the item faster than it is consumed.

Scenario C.3 Consider an item with the following discrete demand distribution for a one-period inventory decision. This item experiences a seasonal demand pattern.A profit of $15 per unit is made if the item is sold in season,but a loss of $10 per unit is incurred if the item is sold after the season is over. -Use the information in Scenario C.3.What is the order quantity with the highest expected payoff?

Use of the the single-period model will maximize profit in every season.

A manufacturer produces aluminum cans internally rather than purchasing them and uses the economic production lot size equation to govern this process.The length of time that the aluminum can batch runs is given by the equation ________ and the time between the start of one batch of cans to the next is found by the equation ________.

A production manager is making a decision on batch size for a product with an annual demand of 25,000 units per year.The setup cost for each batch is $45 and once the setup is complete,the product may be produced at the rate of 650 units per day.There is a holding cost of $2 per unit per year and the plant operates on a 250-day production year.How big should the production batch be and how long (in days)will it take to produce the batch?

As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 1,000 units.Ordering costs are $50 each time an order is placed,and the holding cost is 25 percent of the per-unit price.Your supplier provided the following price schedule. What ordering-quantity policy do you recommend?

In a single period model,if purchase quantity Q exceeds demand rate D,then the number of units sold after the season is ________.

Scenario C.2 Egan Schranz sells Klammelhoffer skis out of his store in the Alps.The store makes a $75 profit per unit sold during the ski season,but it will take a $25 loss per unit if sold after the season is over.The following discrete probability distribution has been estimated for the season's demand. -Use the information in Scenario C.2.What is the payoff with an order quantity (Q)of 80 units if the demand (D)is 60 units?

Scenario C.1 Jerry Allison is in charge of production for a small producer of plumbing supplies.The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day.The company produces (and sells)the cricket 300 days per year.Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario C.1.What is the maximum inventory if Jerry chooses to produce at the economic production lot size (ELS)?

In an economic production lot size situation,the producer is producing half the time if the ratio of production rate to demand rate is ________.

In a one-period inventory model,the higher the after-season sales price,the higher the order placed at the start of the season.

Scenario C.1 Jerry Allison is in charge of production for a small producer of plumbing supplies.The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day.The company produces (and sells)the cricket 300 days per year.Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario C.1.If Jerry chooses to produce the batch size suggested by the economic production lot size (ELS)model,what is the annual cost?

Explain why in any given season,the one-period decision model may result in a poor choice for a stocking level?

Sketch the economic production lot size (ELS)graph of inventory level as a function of time and label all elements of the graph.