Exam 6: Inventory Control Models

In a quantity discount model, the purchase cost or material cost must be included in the total cost calculation.

The purchasing manager for a firm is trying to determine what the safety stock should be for a particular product.She has developed the following table, which gives the distribution of demand during the lead-time and the probabilities: The carrying cost is $5 per unit per year, the ordering cost is $30 per order, and the stockout cost is $40 per unit.The reorder point is 60 units, and 6 orders are placed each year.What level of safety stock should be maintained?

An inventory model that can handle dependent demand is called a(n)

We can usually determine an appropriate safety stock even if we are unable to accurately assess the actual cost of a stockout.

Daniel 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?

The purpose of the EOQ model is to achieve a balance between the cost of holding inventory and the cost of stockouts.

ArtHogan, Ltd., distributes mechanical replacements for human mitral heart valves.Its artificial valve has a demand of 123,456 units per year and sells for $500 per unit.The cost of ordering is $234 per order and the average carrying cost per unit per year is 25% of the unit cost.Determine the economic order quantity.

Anne Beck recently took over a beauty supply store.Her predecessor always ordered shampoo in quantities of 100 units.Anne is reevaluating this policy.Based on her analysis, the cost to place each order is $35 and the holding cost is $8 per shampoo bottle per year.The annual demand for this product is 2500 bottles.Should Anne change the current order policy and, if so, how much can she save?

List several disadvantages of buying inventory in large quantities.

David and Beth Sheba run a health food store.Their top selling item is called Heavenly Kelp.The annual demand for this is 810 units, and demand is constant throughout the year.The cost of placing an order is $20, while the holding cost per unit per year is $4. (a)How many orders per year should be placed if they wish to minimize their total cost? (b)What is the minimum possible annual holding and ordering cost?

Suppose that lead-time demand is normally distributed with a mean of 250 units and a standard deviation of 50 units.If a firm wants to maintain a 95% service level, what should the reorder point be?

A person is using the normal distribution to determine the safety stock for a product.The Z value of 2.33 would be associated with what service level?

Which of the following does not have an impact on EOQ?

The EOQ model without the instantaneous receipt assumption is commonly called the

Hertz Donuts sells artisanal donuts for $25 per dozen to unsuspecting hipsters.It costs them $8 per dozen to make donuts and any unsold donuts are sold as "Oldies But Goodies" for $5 per dozen the next day (or two, no one really pays attention to the sell-by dates).The demand pattern's probability distribution is displayed in the table. If they elect to make 4 dozen donuts per day what is their expected profit?

Which of the following is not an assumption for the basic EOQ model?

How does a kanban system help identify bottlenecks and production problems?

Briefly describe the progression from MRP to ERP systems.

An increase in holding cost will increase the economic order quantity, holding all other factors constant.

What are the potential benefits and detriments of an ERP implementation?