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Exam 6: Inventory Control Models

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Question 21

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Andre Candess manages an office supply store.One product in the store is computer paper.Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year.There are 250 working days per year and the lead-time is 3 days.The cost of placing an order is $30,while the holding cost is $15 per box per year.How many units should Andre order each time?

A) 200
B) 400
C) 500
D) 100
E) None of the above

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Question 22

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The two fundamental decisions that you have to make when controlling inventory are: (1)how much to order,and (2)how much money to spend.

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Question 23

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Bret's bakery must decide how many loaves of fresh bread to produce in a single day.Daily demand for fresh bread is normally distributed with a mean of 70 loaves and standard deviation of 18.If the marginal loss is $2 and the marginal profit is $1,how much bread should Bret's bakery produce in a single day?

Purchasing department supplies comprise one of the "carrying cost factors."

Mark Achin sells 3,600 electric motors each year.The cost of these is $200 each,and demand is constant throughout the year.The cost of placing an order is $40,while the holding cost is $20 per unit per year.There are 360 working days per year and the lead-time is 5 days.If Mark orders 200 units each time he places an order,what would his average inventory be (in units) ?

The production run model is useful when a firm purchases inventory that is delivered over a period of time.

What are the five uses of inventory?

Judith Thompson,the manager of the student center cafeteria,has added pizza to the menu.The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria.Judith anticipates a weekly demand of 10 pizzas.The cafeteria is open 45 weeks a year,5 days a week.The ordering cost is $15 and the holding cost is $0.40 per pizza per year.The pizza vendor has a 4-day lead-time and Judith wants to maintain 1 pizza for safety stock.What is the optimal reorder point?

Which of the following factors is (are) not included in ordering cost?

Economic order quantity (EOQ)analysis has recently become practical as a consequence of high-speed computers.

Sensitivity analysis of EOQ refers to

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units.However,due to recent events he has a cash flow problem.Therefore,he orders only 100 units each time he places an order.Which of the following is true for this situation?

Discuss why it is sometimes prudent not to order the minimum level required to obtain a quantity discount.

The annual demand for a product has been projected at 2,000 units.This demand is assumed to be constant throughout the year.The ordering cost is $20 per order,and the holding cost is 20 percent of the purchase cost.Currently,the purchase cost is $40 per unit.There are 250 working days per year.Whenever an order is placed,it is known that the entire order will arrive on a truck in 6 days.Currently,the company is ordering 500 units each time an order is placed.What is the total holding cost for the year using this policy?

As the service level increases,

For the basic EOQ model,which of the following relationships is not true?

The annual demand for a product has been projected at 2,000 units.This demand is assumed to be constant throughout the year.The ordering cost is $20 per order,and the holding cost is 20 percent of the purchase cost.The purchase cost is $40 per unit.There are 250 working days per year.Whenever an order is placed,it is known that the entire order will arrive on a truck in 6 days.Currently,the company is ordering 500 units each time an order is placed.What level of safety stock would give a reorder point of 60 units?

ABC analysis places inventory into 26 categories for computer analysis.

A company annually uses 1,200 of a certain spare part that costs $25 for each order and has a $24 annual holding cost.Calculate the total annual cost for order sizes of: 25,40,50,60,and 100.Identify the economic order quantity,and consider the implications for making an error in calculating the economic order quantity.

One reason inventory is required is the uneven flow of resources through a company.