Exam 6: Inventory Control Models

Consider the material tree structure for material A.Assume 10 units 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? (e)How many units of F are needed?

Judith Thompson is the manager of the student center cafeteria.She is introducing pizza as a menu item.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.What is the optimal number of pizzas Judith should order?

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

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.How many elementary statistics books should the campus bookstore stock for sale to students?

Kanban is a Japanese word that literally means box.

ABC analysis places inventory into 26 categories for computer analysis.

Fresh First grocery store faces demand for freshly squeezed orange juice.The daily demand for freshly squeezed pomegranate juice ranges from 0 to 5 gallons.The grocery store offers the juice in a special 1 gallon bottle that will be discarded after a day.Each gallon costs $2 to make and is sold for $5.The daily demand for pomegranate juice varies according to the following distribution: How many gallons of juice should the store make each day?

Which of these statements about EOQ is best?

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

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?

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.Currently, the company is ordering 500 units each time an order is placed.Assuming the company uses a safety stock of 20 units resulting in a reorder point of 60 units, what is the expected lead-time for delivery?

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.What is his economic order quantity in units?

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?

The annual demand for a product is 1,000 units.The company orders 200 units each time an order is placed.The lead-time is 6 days.There are 250 working days per year.If the reorder point is 50, what safety stock are they using?

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.If R.C.wishes to minimize his total annual inventory costs, he must evaluate the total cost for two possible order quantities.What are these two possible quantities? (Round answer to nearest unit.)

The annual demand for a product is 1,000 units.The company orders 200 units each time an order is placed.The lead-time is 6 days, and the company has determined that 20 units should be held as a safety stock.There are 250 working days per year.What is the reorder point?

Candy Incorporated stocks bubble gum game cards, an item that has a normally distributed demand during the reorder period with a mean of 12 dozen boxes and a standard deviation of two dozen boxes.If it is desirable to experience a stockout only 10 percent of the time, what is the appropriate safety stock?

Sensitivity analysis of EOQ refers to

Spoilage, theft and obsolescence are all considered to be carrying cost factors.

One of the assumptions of the basic EOQ model is that the receipt of inventory is instantaneous.