Exam 10: Inventory Models

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 production lot size,Q,the average inventory is one-half the maximum inventory,or 1/2Q.

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

Show the total cost expression and calculate the EOQ for an item with holding cost rate 18%,unit cost $8.00,annual demand of 40,000,and ordering cost of $48.

If lead time is longer than the review period,the order quantity at any review point is the amount needed for the inventory on hand plus all outstanding orders to reach the replenishment level.

Inventory models for which the rate of demand is constant or nearly constant are called

The objective of the EOQ with quantity discounts model is to

Periodic review systems require smaller safety stock levels than corresponding continuous review systems.

The Tiernan Gallery and Art Museum distributes to its visitors a printed guide to its collections.The museum has about 18,000 visitors per year.Holding costs for the brochures are 20%,and it costs $30 to place an order with the printer.The printer has offered the following discount schedule: ​ How many brochures should be printed at a time?

Which of the following is NOT implied when average inventory is Q/2,where Q is the order quantity?

Kellam Images prints snack food bags on long rolls of plastic film.The plant operates 250 days a year.The daily production rate is 6000 bags,and the daily demand is 3500 bags.The cost to set up the design for printing is $300.The holding cost is estimated at 2 cents per bag. a.What is the recommended production lot size? b.If there is a five-day lead time to set up the line,what is the recommended reorder point?

Constant demand is a key assumption of the EOQ model.

Zip Games purchases blank DVD disks onto which it copies its software for sale through its mail-order operation.A disk costs Zip $0.20.Processing an order for more disks cost $15.Zip uses 60,000 disks annually,and the company has a 25% cost of capital. a.Find the optimal order quantity. b.How many orders are placed annually? c.How frequently will orders be placed?

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 indicate 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 0.03.​ 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 the order point be?

If an item's per-unit backorder cost is greater than its per-unit holding cost,no intentional shortage should be planned.

Kelly's Service Station does a large business in tune-ups.Demand has been averaging 210 spark plugs per week.Holding costs are $0.01 per plug per week,and reorder costs are estimated at $10 per order.Kelly does not want to be out of stock on more than 1% of his orders.There is a one-day delivery time.The standard deviation of demand is five plugs per day.Assume a normal distribution of demand during lead time and a seven-day work week. a.What inventory policy do you suggest for Kelly's station? b.What is the average amount of safety stock for the reorder point in part (a)? c.What is the total variable weekly cost including safety stock cost?

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

When the reorder point r exceeds Q*,the difference is

The expression Q* refers to the

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