Chat with AIExam 18: Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints
The following reasons have been offered for holding inventories: 1. To balance ordering or setup costs and carrying costs.
2. To satisfy customer demand (e.g., meet delivery dates).
3. To avoid shutting down manufacturing facilities because of
(a) machine failure
(b) defective parts
(c) unavailable parts
4. Unreliable production processes.
5. To take advantage of discounts.
6. To hedge against future price increases.
A)Explain how the JIT approach responds to each of these reasons and,consequently,argues for insignificant levels of inventories.
B)The theory of constraints (TOC)criticizes the JIT approach to inventory management,arguing that it fails to protect throughput.Explain what this means and describe how TOC addresses this issue.
(39) 
Verifieda.1.JIT does not accept setup (or ordering) costs as a given; rather, JIT attempts to drive these costs to zero by reducing the time it takes to set up and by developing long-term contracts with suppliers. Carrying costs are minimized by reducing inventories to insignificant levels.
2.JIT reduces lead times, which increases a firm’s ability to meet requested delivery dates. This is accomplished by (1) reduction of setup times, (2) improved quality, and (3) cellular manufacturing.
3.The problems that usually cause shutdowns are (1) machine failure, (2) defective material or subassembly, and (3) unavailability of a material or subassembly (either not delivered or delivered late). JIT attempts to solve each of the three problems by emphasizing total preventive maintenance, total quality control (strives for zero defects), and building the right kind of relationship with suppliers.
4.Unreliable production processes are addressed by total quality management. As fewer defective units are produced, there is less need for inventory to replace nonconforming units.
5.The objective of taking advantage of discounts is to lower the cost of inventory. JIT accomplishes the same objective by negotiating long-term contracts with a few chosen suppliers and establishing more extensive supplier involvement.
6.JIT emphasizes long-term contracts that stipulate prices and acceptable quality levels.
b.JIT has the policy of stopping production if a problem is detected so that the problem can be corrected (of course, the problem may also cause production to stop independent of a policy or practice of stopping so that the source of the problem can be corrected). Since JIT produces on demand, any interruption of production means that throughput is lost. TOC uses a time buffer located in front of the binding constraint to protect throughput. The time buffer is designed to keep the constrained resource busy for a specified period of time—a time long enough to overcome most disruptions in production.
One of the traditional reasons for holding inventory is to avoid shutdowns due to defective parts.What is the JIT solution meant to do?
(34) VerifiedD
Which of the following costs is included in the cost of acquiring inventory?
(38) VerifiedA
Which of the following costs are considered in the EOQ model?
(34) What is the correct order of the five steps to achieve the goal of improving organizational performance? 1. Exploit the binding constraints.
2. Elevate the organization's binding constraints.
3. Iclentify an organization's constraints.
4. Repeat the process as a new constraint emerges to limit output.
5. Subordinate everything else to the decisions made when exploiting the binding constraints
(49) In the graphic method of solving a linear programming problem,which of the following is depicted on the graph?
(40) The following information is available for Walters Furniture Company, which sells two products:
Table X Table Y Processing time 4 hours 6 hours Metal used 30\cdot. 18. Selling price \ 200.00 \ 100.00 Variable cost \ 150.00 \ 60.00 Fixed cost. \ 30.0 \ 30.00 There are 200 hours available in the plant and 200 square metres of metal available per operating period.
-Refer to the figure.What is the constraint equation representing processing time available?
(37) What is the term for a marker or card that specifies the quantity that a subsequent process should take from a preceding process?
(29) eal Company has the following information available concerning one of its inventory items:
Cost of placing an order \ 32.00 Unit carrying cost per year \ 4.00 Annual unit demand 5,625 Safety stock 100 Average daily demand 25 Normal lead time in days 10
-Refer to the figure.What is the economic order quantity for this item?
(33) Hassel Company manufactures two different products, X and Y. The company has 100 kilograms of materials and 300 direct labour hours available for production.
The time requirements and contribution margins per unit are as follows:
Product X Product Y Contribution margin per unit \ 4 \ 5 Materials per unit (kg) 1 2 Direct labour hours per unit 4 2
-Refer to the figure.What is the equation for the constraint on direct labour?
(39) One of the traditional reasons for holding inventory is to avoid shutdowns due to unavailability of materials.What is the JIT solution meant to do?
(31) Cardinal Dry Cleaners has 400 hours a week available to use in dry cleaning or laundry.Four thousand centimetres of hanging space is available.The average item that is dry cleaned takes 6 inches of hanging space,whereas laundry items take up only 3 inches of hanging space.The contribution margin for laundry items averages $3.50; dry cleaned items average $6.50.Fifty items can be washed per hour,whereas only 20 can be dry cleaned.
a.Determine the objective function.Is it a minimization or maximization function?
b.Set up the constraint equations.
(31) The following information is available for Wilson Trailer Company, which sells two products:
Trailer A Trailer B Pracessing time 2 hours 4 hours Vinyl cover used 16 s. metres 12 sq. metres Selling price \ 50.00 \ 80.00 Variable cost \ 35.00 \ 50.00 Fixed cost \ 10.00 \ 20.00 There are 100 hours available in the plant and 75 square metres of vinyl available per operating period.
-Refer to the figure.Which statement best describes the relationship between these products?
(35) Which of the following are measures of organizational performance that the theory of constraints focuses on?
(44) Tiffany Manufacturing Company produces X and Y with contribution margins per unit of $10 and $90, respectively. Only 200 labour hours and 400 machine hours are available for production.
Time requirements to produce one unit of X and Y are as follows:
Product X Product Y Labour hours per unit 1 2 Machine hours per unit 5 1
-Refer to the figure.What is the objective function to maximize profits for Tiffany Manufacturing Company?
(28) 
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