Exam 6: Inventory Control Models

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)?

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

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 should be the reorder point (excluding any safety stock) under the current policy?

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

Service level is the chance, measured in percent, that there will be a stockout.

The EOQ model is relatively insensitive to minor violations of the basic assumptions.

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

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

Which of the following statements concerning ABC analysis is false?

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.

A company uses 2,750 per year of a certain subassembly that has a purchase cost of $450, and an annual holding cost of $500 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 12 working days before it can expect to receive that order. For this subassembly, find: (a) the economic order quantity. (b) the 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. 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?

In the decoupling function, some inventory may be stored between each production process to act as a buffer.