Exam 6: Inventory Control Models

Elizabeth Kennedy sells beauty supplies.Her annual demand for a particular skin spackle is 17,000 units.The cost of placing an order is $50, while the holding cost per unit per year is 20 percent of the cost.This item currently costs $12.50 if the order quantity is less than 1500.For orders of 1501 units up to 10,000 units the cost falls to $12.45 and for orders of 10,001 or greater, the cost falls to $12.40.To minimize total cost, how many units should Elizabeth order each time she places an order? What is the minimum total cost?

Consider the material structure tree for item A below.Assume 15 units of A are needed. (a)How many units of B are needed? (b)How many units of C are needed? (c)How many units of D are needed? (d)How many units of E are needed?

One advantage of buying in bulk is

A structure tree of the components in a product, with a description and the quantity required to make each product is called a(n)

What is the purpose of all inventory models?

Safety stock is ignored when computing the reorder point.

In the optimal decision rule using marginal analysis for the single period model, we will stock an additional unit as long as the probability of selling one or less unit is less than the ratio ML/(ML + MP)where ML is marginal loss and MP is marginal profit.

All of the following are used for marginal analysis with the normal distribution in a single period model except

What are the five uses of inventory?

The H.A.L.Computer Store sells a printer for $200.Demand for this is constant during the year, and annual demand is forecasted to be 600 units.The holding cost is $20 per unit per year, while the cost of ordering is $60 per order.Currently, the company is ordering 12 times per year (50 units each time).There are 250 working days per year and the lead-time is 10 days. (a)Given the current policy of ordering 50 units at a time, what is the total of the annual ordering cost and the annual holding cost? (b)If the company used the absolute best inventory policy, what would the total of the ordering and holding cost be? (c)What is the reorder point?

Rose Arena is the production manager for a manufacturing firm that produces buggy whips and other items.The annual demand for a particular buggy whip is 1,600 units.The holding cost is $2 per unit per year.The cost of setting up the production line is $25.There are 200 working days per year.Rose decided to produce 200 units each time she started production of the buggy whips.If it took her 4 days to produce the 200 units, what was her production rate?

The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40.They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each.All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each.What is the marginal profit for a single elementary statistics book?

Jack Spratt is the production manager for a manufacturing firm that produces wizzy-gadgets and other items.The annual demand for a particular wizzy-gadget is 1,600 units.The holding cost is $2 per unit per year.The cost of setting up the production line is $25.There are 200 working days per year.The production rate for this product is 80 per day.If his maximum inventory level is 180 units, how many units did he produce each time he started production of the wizzy-gadgets?

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.If he orders in batches of 500 boxes at a time, what is his annual ordering cost?

The "point at which to reorder" depends directly on which of the following?

The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4.If they have calculated a reorder point of 46.60 units, what service level are they assuming?

With ________, inventory arrives just before it is needed.

A major objective of inventory models is to minimize inventory costs.

ERP systems are expensive to buy and costly to customize.

R.C.Barker makes purchasing decisions for his company.One product that he buys costs $50 per unit when the order quantity is less than 500.When the quantity ordered is 500 or more, the price per unit drops to $48.The ordering cost is $30 per order and the annual demand is 7,500 units.The holding cost is 10 percent of the purchase cost.How many units should R.C.order to minimize his total annual inventory cost? (Round your answer to the nearest unit.)