Exam 6: Inventory Control Models

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. )

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

Demand for local newspapers in King County during weekdays is normally distributed with a mean of 500 and standard deviation of 100.The marginal loss per paper is $0.10 and marginal profit is $0.40.How many newspapers should the local publisher produce each 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.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?

Everett Mann's Dream Store sells waterbeds and supplies.The best selling bed in the store has an annual demand of 400 units.The ordering cost is $40,while the holding cost is $5 per unit per year.There are 250 working days per year,and the lead-time is 6 days. (a)To minimize total cost,how many units should be ordered each time an order is placed? (b)If the holding cost per unit was $6 instead of $5,what would the optimal order quantity be?

For the single-period model,if marginal loss increases relative to marginal profit,then the optimal order quantity will increase.

Rolf Steps is the production manager for a local manufacturing firm.This company produces staplers and other items.The annual demand for a particular stapler 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 Rolf decided to produce 200 units each time he started production of the stapler,what would his maximum inventory level be?

The objective of a(n)________ system is to reduce costs by integrating all of the operations of a firm.

List several disadvantages of buying inventory in large quantities.

A person is using the normal distribution to determine the safety stock for a product.What z value would be associated with a 90 percent service level?

List major ordering cost factors.

Inventory is the common thread that ties all the functions and departments of the organization together.

Inventory

In making inventory decisions,the purpose of the basic EOQ model is to

Which of the following is not a use of inventory?

List major carrying cost factors.

The costs involved in a typical inventory model are order costs,management costs,and holding costs.

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.How many units should the company order each time an order is placed if the company wishes to minimize total inventory cost?

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

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.