Exam 20: Special Inventory Models

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario D.1.What is the maximum inventory if Jerry chooses to produce at the economic production lot size (ELS)?

Which one of the following statements about quantity discounts is best?

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario D.1.How many production runs per year are needed if Jerry chooses to produce at his economic production lot size (ELS)?

Consider an item with the following discrete demand distribution for a one-time inventory decision. Demand (D) Demand Probability 10 0.15 20 0.20 30 0.30 40 0.20 50 0.15 This item experiences a seasonal demand pattern. A profit of $15 per unit is made if the item is sold in season, but a loss of $10 per unit is incurred if sold after the season is over. -Use the information in Scenario D.3.What is the payoff when 40 units are ordered but a demand of 30 materializes?

Why are there discontinuities (areas where the curve jumps up or down and is not smooth)in the total cost curve in the quantity discount model?

Kyle store sells K2 skis. The store makes a $200 profit per unit sold during the ski season, but it should take a $50 loss per unit if sold after the season is over. The following discrete probability distribution has been estimated for the season's demand. Demand (D) Demand Probability 10 0.1 20 0.3 30 0.3 40 0.2 50 0.1 -Use the information in Scenario D.2.What is the payoff with an order quantity (Q)of 40 units if the demand (D)is 30 units?

A world traveler prepares to leave the comforts of home for a back to nature visit to Gilligan's Island,where all transactions are conducted in coconuts and the banking system is completely undeveloped.The traveler can buy cocoanuts for $2 each before the journey.If he fails to bring enough cocoanuts with him and runs out,he must get some cocoanuts flown in at a cost of $5 each.If he finishes his vacation and has leftover cocoanuts he can cash them in when he returns home,but will receive only $1.50 per cocoanut.What is his loss per unit if he overstocks on cocoanuts prior to leaving home?

For analysis using the economic production lot size (ELS)model to be useful,the producer must be able to produce the item faster than it is consumed.

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario D.1.What is the economic production lot size (ELS)?

Consider a noninstantaneous replenishment situation in which the production rate is 100 units per day,the demand rate is four units per day,and the economic production lot size is 500 units.Which of the following statements is true?

A pencil supplier just introduced quantity discounts.The price schedule follows. Order Quantity Price per Unit 000-199 \ 4.00 200-399 \ 3.00 400 and more \ 2.00 XYZ store's annual demand remains at 500 units and ordering cost at $10 per order.If annual holding cost is 10 percent of the pencils' per-unit price,what order quantity should XYZ select to minimize all costs?

The one-period inventory model is commonly known as the newsboy problem.

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario D.1.If Jerry chooses to produce batches dictated by the economic production lot size (ELS)model,how many days elapse between the start of consecutive production runs (what is the time between runs or TBO)?

A(n)________ is the minimum quantity needed to receive a discount.

In a noninstantaneous replenishment model,as the daily demand approaches the daily production rate,

The need for one-time inventory decisions also can arise in manufacturing plants when ________ items are made to a single order and ________ are high.

A manufacturer produces aluminum cans internally rather than purchasing them and uses the economic production lot size equation to govern this process.The length of time that the aluminum can batch runs is ________ and the time between the start of one batch of cans to the next is ________.

As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 300 units.Ordering cost is $20 each time an order is placed,and the holding cost is 30 percent of the per-unit price.Your supplier provided the following price schedule. Price per Unit Order Quantity \ 6.00 000-149 \ 5.00 150-199 \ 4.00 200 and more What ordering-quantity policy do you recommend?

Consider an item with the following discrete demand distribution for a one-time inventory decision. Demand (D) Demand Probability 10 0.15 20 0.20 30 0.30 40 0.20 50 0.15 This item experiences a seasonal demand pattern. A profit of $15 per unit is made if the item is sold in season, but a loss of $10 per unit is incurred if sold after the season is over. -Use the information in Scenario D.3.What is the payoff when 40 units are ordered but a demand of 50 materializes?

The economic production lot size represents the maximum quantity of on-hand inventory for a manufacturer.