Exam 9: Inventory Management

Scenario 9.5 Tom Bergman,owner and operator of the Earplug Superstore,is reviewing the costs associated with the store's best-selling hearing aid,the BZ15.The data available to Dr.Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cost = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. -Use the information in Scenario 9.5.If Tom decides to order at the economic order quantity,what is the sum of the annual ordering cost and holding cost?

Scenario 9.6 Consider the following data for an independent-demand item maintained by Angie Bonpensiero,the proprietor of a local auto repair shop: Weekly demand = 50 units Ordering cost = $8/order Holding cost = $4/unit/year Weeks in a year = 50 -Use the information in Scenario 9.6.If Bonpensiero uses the EOQ model,how frequently must she place orders for this item?

Scenario 9.11 Demand = 50,000 units/week Standard deviation of weekly demand = 15,000 units Average lead time = 8 weeks Standard deviation of lead time: 3 weeks Cycle-service level = 80% A continuous review system is used to control inventory. A normal distribution table is appended to this exam. -Use the information in Scenario 9.11.What reorder point should the firm use for this product? A)greater than 0 but less than or equal to 150,000 units B)greater than 150,000 units but less than or equal to 300,000 units C)greater than 300,000 units but less than or equal to 400,000 units D)greater than 400,000 units but less than or equal to 500,000 units E)greater than 500,000 units

Setup cost is independent of order size.

Inventories needed for the production of services and goods (inputs to a firm's transformation processes)are called:

Scenario 9.3 The Talbot Company uses electrical assemblies to produce an array of small appliances.One of its high cost / high volume assemblies,the XO-01,has an estimated annual demand of 8,000 units.Talbot estimates the cost to place an order is $50,and the holding cost for each assembly is $20 per year.The company operates 250 days per year. -Use the information in Scenario 9.3.What is the annual inventory holding cost if Talbot orders using the EOQ quantity?

Which one of the following statements concerning a continuous review system is BEST?

A ________ is an incentive to order larger quantities,where the price per unit decreases when the order is sufficiently large.

When using ABC analysis,class C SKUs should be reviewed frequently.

________ consists of items such as components or assemblies needed for a final product in manufacturing.

The Hastings Company is a nation-wide wholesaler for small electronic devices.One of its most popular items is a new GPS unit called the WAMI-1000.Hastings has gathered the following information,and has asked you to develop a continuous review inventory control system for this item: Order quantity for each order placed with manufacturer = 50,000 units Average demand = 5,000 units/week Standard deviation of weekly demand = 1,000 units Average lead time = 4 weeks Standard deviation of lead time: 1 week Cycle-service level = 90% (z for 90% = 1.28) a.What is the standard deviation of demand during lead time? b.What is the safety stock level that should be carried for the WAMI-1000? c.What is the reorder point for the WAMI-1000? d.Summarize the actions Hastings should take using your new inventory system. e.If Hastings decides to increase its cycle-service level to from 90% to 99% (z for 99% = 2.33),how does this change the actions that should be taken?

Scenario 9.7 Cranium,Inc. ,purchases term papers from an overseas supplier under a continuous review system.The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day.It costs $60 to process each order and there is a five-day lead-time.The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level.Cranium operates 200 days per year.A normal distribution table is appended to this exam. -Use the information in Scenario 9.7.What service level does a reorder point of 1,524 imply?

________ are orders that have been placed but not yet received.

EOQ should be used if you use a make-to-order strategy and the customer specifies that the entire order be delivered in one shipment.

Inventory management is the planning and controlling of inventories in order to meet the competitive priorities of the organization.

In an ABC analysis,class ________ SKUs,which typically make up about ________ % of the SKUs,account for only about 15% of the dollar usage.

Scenario 9.9 "Gollee those cats sure go through a lot of food," Geoff exclaimed as he saw the shopping list pad that had been pre-printed with the words "cat food" a the top.He pondered a different approach to shopping for the furry little darlings,reviewed his shopping records,and discovered the following.The price of cat food has held steady at 89 cents per can.Despite feigning indifference,each of the seven cats nibbles their way through an average of one can per day,three hundred sixty five days a year.The price of gasoline has held constant at $3.50 per gallon and his pickup uses a gallon each way to the cat food store.The cost to hold a can of cat food is 10% of the unit price. -Use the information in Scenario 9.9 to determine the amount of time in-between trips to the cat food store if Geoff wisely elects to follow an EOQ policy for obtaining cat food.

The term lot size signifies:

The number of setups (or orders)per year is determined by the annual demand and ________.

The ________ is the predetermined minimum level that an inventory position must reach before a fixed quantity (Q)is ordered.