Exam 14: Inventory Models

Henderson Furniture sells reproductions of 18th century furniture.For a particular table,the assumptions of the inventory model with backorders are valid. D = 200 tables per year I = 25% per year C = $800 per table C_o = $80 per order C_b = $50 per table per year The store is open 250 days a year. a.What are the values for order quantity and number of planned backorders that will minimize total cost? b.What is the maximum inventory? c.What is the cycle time? d.What is total cost?

Amazing Bakers sells bread to 40 supermarkets.It costs Amazing $1,250 per day to operate its plant.The profit per loaf of bread sold in the supermarket is $.025.Any unsold bread is returned to the Amazing Thrift Store to be sold at a loss of $.015. a.If sales follow a normal distribution with  = 70,000 and  = 5,000 per day, how many loaves should Amazing bake daily? b.Amazing is considering a different sales plan for which the profit per loaf of bread sold in the supermarket is $.03 and the loss per loaf bread returned is $.018. If  = 60,000 and  = 4,000 per day, how many loaves should Amazing bake daily?

The Fitness Shop is considering ordering a special model exercise machine.Each unit will cost the shop $410 and it will sell for $750.Any units not sold at the regular price will be sold at the year-end model clearance for $340.Assume that demand follows a normal probability distribution with  = 20 and  = 6.What is the recommended order quantity?

Explain the difference between a periodic and a continuous review system.

What compromise must be made in the how-much-to-order decision?

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

For the inventory model with planned shortages,the optimal order quantity results in

The single-period inventory model is most applicable to items that are perishable or have seasonal demand.

Inventory

Show the total cost expression and calculate the EOQ for an item with holding cost rate 18%,unit cost $8.00,annual demand of 40000,and ordering cost of $48.

The terms inventory on hand and inventory position have the same meaning.

The maximum inventory with backorders is

To be considered as inventory,goods must be finished and waiting for delivery.

The definition of service level used in this chapter is

As lead time for an item increases,the cycle time increases.

For the EOQ model,which of the following relationships is incorrect?

What are the two most critical behaviors of an inventory system you need to recognize in order to apply the best model?

Non-Slip Tile Company (NST)has been using production runs of 100,000 tiles,10 times per year to meet the demand of 1,000,000 tiles annually.The set-up cost is $5,000 per run and holding cost is estimated at 10% of the manufacturing cost of $1 per tile.The production capacity of the machine is 500,000 tiles per month.The factory is open 365 days per year. a. What production schedule do you recommend? b. How much is NST losing annually with their present production schedule? c. What is the maximum number of tiles in inventory under the current policy? under the optimal policy? d. What fraction of time is the machine idle (not producing tiles) under the current policy? Under the optimal policy?

Ken Ells,owner and operator of Kennels,Inc.is concerned that the person in charge of ordering dog food is often incurring an order expediting expense because he is waiting too long (letting the inventory level drop too low)before ordering. Past data indicates that demand during lead time (when expediting does not occur)is normally distributed with a mean of 340 pounds and a standard deviation of 45 pounds. Ken wants the probability of running out of dog food to be .03. a. If the current order point is 400 pounds, what is the resulting service level? b. If Ken wants a service level of 97% for dog food, what should be the order point?

For inventory systems with constant demand and a fixed lead time,