Exam 20: Supplement C Special Inventory Models

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 given by the equation ________ and the time between the start of one batch of cans to the next is found by the equation ________.

In an economic production lot size situation, the production rate is always ________ than the demand rate.

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?

In a one-period inventory model, the after-season sales price may be zero.

The pile of inventory accumulated in an economic production lot size situation is ________ than the lot size dictated by the ELS calculation.

Scenario C.3 Consider an item with the following discrete demand distribution for a one-period inventory decision. 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 the item is sold after the season is over. -Use the information in Scenario C.3. What is the payoff when 40 units are ordered but a demand of 30 materializes?

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 coconuts for $2 each before the journey. If he fails to bring enough coconuts with him and runs out, he must get some coconuts flown in at a cost of $5 each. If he finishes his vacation and has leftover coconuts he can cash them in when he returns home, but will receive only $1.50 per coconut. What is his loss per unit if he overstocks on coconuts prior to leaving home?

Scenario C.3 Consider an item with the following discrete demand distribution for a one-period inventory decision. 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 the item is sold after the season is over. -Use the information in Scenario C.3. What is the payoff when 40 units are ordered but a demand of 50 materializes?

When do one-period decisions on inventory arise in practice?

As an inventory manager, you must decide on the order quantity for an item. Its annual demand is 350 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. What is the annual cost discrepancy between the optimal order policy and the second best order policy?

A pencil supplier just introduced quantity discounts. The price schedule follows. XYZ store's annual demand remains at 350 units and ordering cost at $2 per order. If annual holding cost is 30 percent of the pencils' per-unit price, what order quantity should XYZ select to minimize all costs?

Walter White must satisfy an annual demand of 50,000 pounds per year. The setup cost for each batch is $6,500 and once the setup is complete, the product may be produced at the rate of 1,800 pounds per day. There is a holding cost of $15 per unit per year and the plant operates on a 350-day production year. Determine the relevant parameters and sketch the inventory cycle through two complete cycles, labeling all lines and vertices.

In a single period model, if purchase quantity Q exceeds demand rate D, then the number of units sold after the season is ________.

Explain why in any given season, the one-period decision model may result in a poor choice for a stocking level?

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

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

Consider a manufacturer that uses the economic production lot size (ELS) model. What must be the relationship be between production rate and demand rate for the producer to spend double the time in the production and demand portion of the inventory cycle than they spend in only the demand portion of the inventory cycle?

Scenario C.1 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 C.1. If Jerry chooses to produce the batch size suggested by the economic production lot size (ELS) model, what is the annual cost?

Which of these statements about the one-period model is best?

In a one-period inventory model, the more profitable the item during the sales season, the manager should place a higher order at the start of the season.