Exam 11: Managing Inventory Throughout the Supply Chain

Willard offers infestation services for friendly tenants according to the following price schedule: for up to 99 mice, the price is $1.05 each, for 100 up to 499 mice the price is $1.00 each, and for any order exceeding 500 mice, the cost is $0.95. He has a flat $250 delivery fee regardless of order quantity. Crystal will need 10,000 mice this year and face a $1 holding cost. What is her optimal order quantity?

Free

(Multiple Choice)

4.9/5

(33)

Question 1

Correct Answer:

Verified

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. Storage cost for the motors is $10 each. In previous years they have bought all 600 at once and they are considering doing this again. What order quantity would you advise and how much can they save using your recommendation instead of their one order per year strategy? Quantity Price/unit 1-49 \ 35.00 50-99 \ 34.00 100-499 \ 33.00 500 or more \ 30.00

Free

(Essay)

4.7/5

(23)

Question 2

Correct Answer:

Verified

Q*= $\sqrt { \frac { 2 D S } { H } }$ = $\sqrt { \frac { 2 ( 600 ) \$ 40 } { \$ 10 } }$ = 69.28 motors
This quantity isn't sufficient for the lowest cost, so costs at this volume and a price of $34 should be compared to the lowest quantity at the next break point, 100 motors for $33 each.
TC_Q = 69 = $\frac { S D } { Q }$ + $\frac { H Q } { 2 }$ + DP = $\frac { \$ 40 ( 600 ) } { 69 }$ + $\frac { \$ 10 ( 69 ) } { 2 }$ + 600($34)= $21,092.83
TC_Q = 100 = $\frac { S D } { Q }$ + $\frac { H Q } { 2 }$ + DP = $\frac { \$ 40 ( 600 ) } { 100 }$ + $\frac { \$ 10 ( 600 ) } { 2 }$ + 600($33)= $20,540.00
Buying in quantities of 100 motors results in a lower cost. Buying 600 motors at a time results in a total cost of:
TC_Q = 600 = $\frac { S D } { Q }$ + $\frac { H Q } { 2 }$ + DP = $\frac { \$ 40 ( 600 ) } { 600 }$ + $\frac { \$ 10 ( 600 ) } { 2 }$ + 600($30)= $21,040.00
It will save the company $500 to purchase 100 motors per order instead of 600 per order.

Gordon went to the grocery store and bought a bag of carrots. He needed only three for his cottage pie recipe, but they came twelve to a bag so he diced three and tossed the rest in the crisper compartment of his stainless steel refrigerator. As he screamed his insults at his children and sous chefs they reminded themselves that he wasn't upset with them, rather he was concerned about the high level of ________ stock he was holding.

Free

(Short Answer)

4.9/5

(28)

Question 3

Correct Answer:

Verified

cycle

Inventory items with demand levels that are beyond an organization's complete control are called ________.

(Short Answer)

4.9/5

(40)

Question 4

The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply)at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the difference in their holding cost if they order at their optimal order quantity compared to their current policy?

(Multiple Choice)

4.8/5

(38)

Question 5

In a single-period system, the target ________ is the balancing point between shortage costs and excess costs.

(Short Answer)

4.8/5

(35)

Question 6

A hospital's biomedical repair shop uses a 4-week periodic system to maintain the inventory on the blood pressure cuff repair parts. They use an average 40 adult arm cuffs with a standard deviation of 6 cuffs during their reorder leadtime. Cuffs aren't the most critical item they carry, but the manager would like to avoid the embarrassment of a stockout at least 95% of the time. What should their restocking level be?

(Multiple Choice)

4.8/5

(31)

Question 7

In a(n) review system, orders are placed at a constant time interval, but in a(n) review system, a constant order is placed at a variable time level.

(Short Answer)

4.7/5

(31)

Question 8

The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply)at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the total cost if they order at their optimal order quantity?

(Multiple Choice)

4.8/5

(32)

Question 9

Willard offers infestation services for friendly tenants according to the following price schedule: for up to 99 mice, the price is $1.05 each, for 100 up to 499 mice the price is $1.00 each, and for any order exceeding 500 mice, the cost is $0.95. He has a flat $1 delivery fee regardless of order quantity. Crystal will need 10,000 mice this year and face a $1 holding cost. What is her optimal order quantity?

(Multiple Choice)

4.9/5

(31)

Question 10

A haberdashery orders ties from manufacturers overseas to satisfy their demand rate of 5,000 units per year that has been stable for the past decade. Placing an order costs 15 euro and holding each cravat in inventory for a year costs 2 euro. The manufacturer offers price breaks for large orders: ordering between 1 and 99 cravats earns the haberdashery a price of 3.5 euro, but ordering 100 to 999 carries a 3.4 euro price. An order of 1000 cravats or more drops the price to 3.3 euro. What's the optimal order quantity for the haberdashery?

(Multiple Choice)

4.9/5

(32)

Question 11

Retailers never need to hold dependent demand inventory items as hedge inventory.

(True/False)

4.9/5

(34)

Question 12

Derive the economic order quantity model, beginning with a definition of terms and graph of cost curves.

(Essay)

4.8/5

(29)

Question 13

Willard offers infestation services for friendly tenants according to the following price schedule: for up to 99 mice, the price is $1.02 each, for 100 up to 499 mice the price is $1.00 each, and for any order exceeding 500 mice, the cost is $0.98. He has a flat $1 delivery fee regardless of order quantity. Crystal will need 10,000 mice this year and face a $4 holding cost. What is her optimal order quantity and how much does Crystal save using this order quantity versus the next best order quantity?

(Essay)

4.8/5

(34)

Question 14

Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence, as slowly)as possible. Central Perk uses 80 filters a day with a standard deviation of 15 days. It would be disastrous if they ran out of these filters, years ago customers caught them using paper towels from the men's room and business suffered. They have set their service level at 99.5% in hopes of avoiding a similar situation. It takes a fortnight to receive a shipment and the standard deviation of the shipping time is five days. What is their reorder point?

(Multiple Choice)

4.7/5

(41)

Question 15

Individual links in the supply chain can stabilize their production at the most efficient level by using:

(Multiple Choice)

4.9/5

(20)

Question 16

Companies do not plan to use safety stock.

(True/False)

4.8/5

(39)

Question 17

A law firm always orders 50 cases of paper from their office supply company. They incur an annual holding cost of $15 per case and have an ordering cost of $25 each time they place an order. If their annual demand is 480 cases, how much could they save annually by switching to their economic order quantity?

(Multiple Choice)

5.0/5

(37)

Question 18

The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply)at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is their optimal order quantity?

(Multiple Choice)

4.9/5

(39)

Question 19

Nothing is too good for my cats, so all their food is custom made at Catastic, who operates a specialty organic food mill in an adjacent state. We need 500 pounds of food per year, distributed evenly throughout the year. It costs $20 shipping and handling to place and receive an order for this delicious food. The cats are fed only on week days, so the 500 pounds per year translates to 2 pounds per day (we go out to restaurants on the weekends). Of course, my cats don't always eat exactly 2 pounds per day, their demand could more precisely be described as an average of 2 pounds and a standard deviation of 0.3 pounds per day. It takes ten days on average to receive an order for food once I place it. It costs $35 to hold a pound of food in inventory for a year and the food costs $850 per pound. It's expensive, yes, but again, nothing is too good for my cats. What amount should I order and when should I order it if I want only a 1% chance of running out of food for my cats?

(Essay)

4.8/5

(32)

Question 20

Showing 1 - 20 of 78

Inventory items with demand levels that are beyond an organization's complete control are called ________.

In a single-period system, the target ________ is the balancing point between shortage costs and excess costs.

In a(n) review system, orders are placed at a constant time interval, but in a(n) review system, a constant order is placed at a variable time level.

Retailers never need to hold dependent demand inventory items as hedge inventory.

Derive the economic order quantity model, beginning with a definition of terms and graph of cost curves.

Individual links in the supply chain can stabilize their production at the most efficient level by using:

Companies do not plan to use safety stock.

Introduction to Operations and Supply Chain Management

Operations and Supply Chain Strategies

Process Choice and Layout Decisions in Manufacturing and Services

Business Processes

Managing Quality

Managing Capacity

S: Advanced Waiting Line Theory and Simulation Modeling

Supply Management

Logistics

Forecasting

Sales and Operations Planning Aggregate Planning

Managing Production Across the Supply Chain

S: Supply Chain Information Systems

Jitlean Production

Managing Projects

Developing Products and Services

Filters

Exam 11: Managing Inventory Throughout the Supply Chain

Inventory items with demand levels that are beyond an organization's complete control are called ________.

In a single-period system, the target ________ is the balancing point between shortage costs and excess costs.

In a(n)________ review system, orders are placed at a constant time interval, but in a(n)________ review system, a constant order is placed at a variable time level.

Retailers never need to hold dependent demand inventory items as hedge inventory.

Derive the economic order quantity model, beginning with a definition of terms and graph of cost curves.

Individual links in the supply chain can stabilize their production at the most efficient level by using:

Companies do not plan to use safety stock.

Introduction to Operations and Supply Chain Management

Operations and Supply Chain Strategies

Process Choice and Layout Decisions in Manufacturing and Services

Business Processes

Managing Quality

Managing Capacity

S: Advanced Waiting Line Theory and Simulation Modeling

Supply Management

Logistics

Forecasting

Sales and Operations Planning Aggregate Planning

Managing Production Across the Supply Chain

S: Supply Chain Information Systems

Jitlean Production

Managing Projects

Developing Products and Services

Filters

In a(n) review system, orders are placed at a constant time interval, but in a(n) review system, a constant order is placed at a variable time level.