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

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

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?

JIT purchasing is done using

Brock Manufacturing uses an average of 2,000 units per day, although usage can run as high as 2,500 units per day. If Brock maintains a recommended amount of safety stock and lead time is four days, what is Brock's reorder point?

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

Following is information pertaining to material that is used in the assembly of automobiles: Required: 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.

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

Evans Company has the following information: Required: a. Determine the economic order quantity for Evans. b. What is the annual savings to Evans Company if it was to change from an order size of 1,000 to the economic order quantity? c. What is the reorder point? d. What is the safety stock needed to prevent stockouts?

Describe the traditional inventory management model.

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. Required: 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 £.)

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. Required: 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.

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

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

Safety stock is an attempt to manage fluctuations in

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. Brown's economic order quantity is

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

The reorder point for inventory depends upon which of the following factors?

July Manufacturing uses an average of 150 units per day, although usage can run as high as 175 units per day. If July maintains a recommended amount of safety stock and lead time is three days, what is July's 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 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

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. The number of frames that Cozy Stoves should produce per setup in order to minimize the total setup and carrying costs is