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

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 carrying cost is

Bernard Company uses 6,000 grams of silver each year to produce jewelry. The cost of placing an order is £2,000. The annual cost of holding one gram of silver is £50. Bernard currently places four orders of 1,500 grams each. Required: a. Compute the annual cost of the current inventory policy. b. Compute the cost that Bernard would incur if it used economic order quantity. c. Compute the amount that Bernard would save if it used economic order quantity rather than the current policy.

If inventory is purchased from an outside supplier, the inventory-related costs are

The reorder point for inventory is calculated as

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 setup costs associated with the economic order quantity are

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 carrying cost is

Economic order quantity refers to the order size that

Ordering frequently in small lot sizes minimizes

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. The number of seats that should be produced per setup in order to minimize the total setup and carrying costs is

Smart Manufacturing uses an average of 20,000 components per day, although usage can run as high as 22,500 components per day. Lead time required for placing an order is four days. Required: a. Determine Smart's reorder point without safety stock. b. Determine Smart's safety stock. c. Determine Smart's reorder point with safety stock.

Placing large, infrequent orders minimizes

JIT avoids shutdowns due to materials shortages in all of the following ways EXCEPT

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

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

Which of the following is NOT considered an ordering cost?

JIT reduces lead times to meet delivery dates by

March Manufacturing uses an average of 150 components per day, although usage can run as high as 175 components per day. If lead time is three days, how much safety stock should March have on hand?

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?

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 three working days and the average rate of usage is 40 bags per day, the reorder point would be