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

Which of the following statements about the kanban system is false?

A stockout is a situation that occurs when there is no inventory on hand.

Extra inventory that is used to avoid stockouts is known as

The concept of inventory is applicable to both manufacturing and service organizations.

Furniture Manufacturers Inc. ,uses 20,000 loads of lumber per year.A load of lumber costs $500 and the carrying cost is 10 percent of the unit cost.The cost to order is $200 per order and the lead-time is three working days.Assuming 200 working days,determine: (a)the economic order quantity. (b)the reorder point. (c)number of orders per year. (d)working days between orders.

Ivonne Callen sells beauty supplies.Her annual demand for a particular skin lotion is 1,000 units.The cost of placing an order is $20,while the holding cost per unit per year is 10 percent of the cost.This item currently costs $10 if the order quantity is less than 300.For orders of 300 units or more,the cost falls to $9.80.To minimize total cost,how many units should Ivonne order each time she places an order? What is the minimum total cost?

A person is using the normal distribution to determine the safety stock for a product.The Z value of 2.33 would be associated with what service level?

Which of the following is not an assumption for the basic EOQ model?

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. )

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 total ordering cost be for the year?

An increase in holding cost will increase the economic order quantity,holding all other factors constant.

Which of the following is part of the determination of EOQ?

David and Beth Sheba run a health food store.Their top selling item is called Heavenly Kelp.The annual demand for this is 810 units,and demand is constant throughout the year.The cost of placing an order is $20,while the holding cost per unit per year is $4. (a)How many orders per year should be placed if they wish to minimize their total cost? (b)What is the minimum possible annual holding and ordering cost?

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

Which of the following statements concerning ABC analysis is false?

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?

Explain the purpose of ABC analysis.

An organization hosting a 5K race is looking to sell t-shirts at the event.Demand for t-shirts is believed to be normally distributed with a mean of 100 and standard deviation of 15.With a marginal loss of $4 and marginal profit of $5,how many t-shirts should the organization stock for the 5K race?

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