Exam 6: Inventory Control Models

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?

What shows how many units are needed at every level of production?

Inventory is such an expensive asset that it may account for as much as 50 percent of a firm's invested capital.

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 if $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 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?

The Handy Manufacturing Company manufactures small air conditioner compressors. The estimated demand for the year is 12,000 units. The setup cost for the production process is $200 per run, and the carrying cost is $10.00 per unit per year. The daily production rate is 100 units per day, and demand has been 50 units per day. Determine the number of units to produce in each batch. (The problem assumes 240 operating days.)

A company uses 1,500 per year of a certain subassembly that has an annual holding cost of $45 per unit. Each order placed costs $150. The company operates 300 days per year and it has found that an order must be placed with the supplier 6 working days before it can expect to receive that order. For this subassembly, find: (a) the economic order quantity. (b) the annual holding cost. (c) the annual ordering cost. (d) the reorder point.

ABC analysis places inventory into 26 categories for computer analysis.

With an annual demand of 2,400 units, daily demand of 10 units, and daily production rate of 40 units, a company has determined that each production run will be for 200 units. If production starts when the inventory level is at zero, how many units would actually be in the warehouse at the end of the first day of production? (Round your answer to the nearest unit.)

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

Which of the following is not a benefit of a well-developed ERP system?

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

Extra inventory that is used to avoid stockouts is known as

Inventory is any stored resource that is used to satisfy a current or future need.

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

Under the assumptions made to develop the EOQ model, average inventory is one-half of the maximum inventory.

With ________, inventory arrives just before it is needed.

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. orders 500 units each time he places an order, what would the total annual holding cost be?

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?