Exam 24: Quantitative Models for the Planning and Control of Inventories

Figure 24-2 Hapsburg Manufacturing purchases components produced by Little Company in the manufacture of its main product. For the next year, Hapsburg expects to use a total of 20,000 parts. Hapsburg typically orders 2,000 units at a time. The cost of placing an order is £100, and the average annual cost of carrying one unit of inventory is £5. -Refer to Figure 24-2. Hapsburg's total ordering cost is

The cost of interrupted production is considered part of the

Figure 24-4 Buckner Manufacturing purchases components produced by Cochran Company in the manufacture of their main product. For the next year, Buckner expects to use a total of 30,000 parts. Buckner typically orders 500 units at a time. The cost of placing an order is £40, and the average annual cost of carrying one unit of inventory is £2. -Refer to Figure 24-4. Buckner's total inventory cost is

Safety stock is an attempt to manage fluctuations in

Following is information pertaining to material that is used in the assembly of automobiles: Annual demand 4,000 units Unit cost £25 Cost of placing an order £600 Carrying cost as a percentage of unit cost 10\% a.Calculate total annual carrying costs for an order quantity of 200 units per order. b.Calculate total annual ordering costs for an order quantity of 200 units per order. c.Determine the optimal order size.

Merrill Manufacturing produces stainless steel sinks. In order to produce the sinks, special equipment must be set up. The setup cost per sink is £10. The cost of carrying sinks in inventory is £1.25 per sink per year. The company produces 50,000 sinks per year. a.Compute the number of sinks that should be produced per setup in order to minimize the total setup and carrying costs. b.Compute the total setup and carrying costs associated with the economic order quantity. (Round to the nearest £.)

Placing large, infrequent orders minimizes

Economic order quantity refers to the order size that

Enchanted Acres sells an average of 6,000 bags of flower seed daily. The lead time required to receive seed from the supplier is four days. What is Enchanted Acres' reorder point?

Nazca Company uses 48,000 grams of silver each year to produce jewelry. The cost of placing an order is £150. The annual cost of holding one gram of silver is £3. Nazca currently places 12 orders of 4,000 grams each. a.Compute the annual cost of the current inventory policy. b.Compute the cost that Nazca would incur if it used economic order quantity. c.Compute the amount that Nazca would save if it used economic order quantity rather than the current policy.

Which of the following is NOT an opportunity cost associated with inventory management?

Figure 24-5 Big Bus Company produces buses. In order to produce the seats for the buses, special equipment must be set up. The setup cost per frame is £40. The cost of carrying seats in inventory is £5 per seat per year. The company produces 100,000 buses per year. -Refer to Figure 24-5. Total setup costs associated with the economic order quantity are

Figure 24-3 Cozy Stoves produces wood-burning stoves. In order to produce the frames for the stoves, special equipment must be set up. The setup cost per frame is £40. The cost of carrying frames in inventory is £5 per frame per year. The company produces 100,000 stoves per year. -Refer to Figure 24-3. Cozy Stoves' total carrying costs associated with the economic order quantity are

Figure 24-1 Mrs. Brown's Bagel Company manufactures specialty bagels. The company buys flour in 50-kg bags that cost £25 each. The company uses 10,000 bags per year, and usage occurs evenly throughout the year. The average cost to carry a 50-kg bag in inventory per year is £4, and the cost to place an order is £10. The company works 250 days per year. Mrs. Brown's Bagel Company manufactures specialty bagels. The company buys flour in 50-kg bags that cost £25 each. The company uses 10,000 bags per year, and usage occurs evenly throughout the year. The average cost to carry a 50-kg bag in inventory per year is £4, and the cost to place an order is £10. The company works 250 days per year. -Refer to Figure 24-1. If Brown's lead time is four working days, the average rate of usage is 40 bags per day, and the company carries a safety stock of 20 bags, the reorder point would be

Perch Pro Shops sells an average of 200 lures per day. The lead time required to receive lures from the supplier is four days. What is Perch's reorder point?

Figure 24-2 Hapsburg Manufacturing purchases components produced by Little Company in the manufacture of its main product. For the next year, Hapsburg expects to use a total of 20,000 parts. Hapsburg typically orders 2,000 units at a time. The cost of placing an order is £100, and the average annual cost of carrying one unit of inventory is £5. -Refer to Figure 24-2. Hapsburg's total inventory cost is

If inventory is produced internally, the inventory-related costs are

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs. The JIT solution is to

Ordering frequently in small lot sizes minimizes

Figure 24-4 Buckner Manufacturing purchases components produced by Cochran Company in the manufacture of their main product. For the next year, Buckner expects to use a total of 30,000 parts. Buckner typically orders 500 units at a time. The cost of placing an order is £40, and the average annual cost of carrying one unit of inventory is £2. -Refer to Figure 24-4. Buckner's total ordering cost is