Exam 12: Inventory Management

A product has a reorder point of 260 units,and is ordered ten times a year.The following table shows the historical distribution of demand values observed during the reorder period. Currently,stockouts are valued at $5 per unit per occurrence,while inventory carrying costs are $2 per unit per year.Should the firm add safety stock? If so,how much safety stock should be added?

If setup costs are reduced by substantial reductions in setup time,the production order quantity is also reduced.

Inventory that separates various parts of the production process performs a ________ function.

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

Which of the following is a requirement of Q systems?

Average daily demand for a product is normally distributed with a mean of 5 units and a standard deviation of 1 unit.Lead time is fixed at four days. a.What is the reorder point if there is no safety stock? b.What is the reorder point if the service level is 80%? c.How much more safety stock is required if the service level is raised from 80% to 90%?

A product has demand of 4000 units per year.Ordering cost is $20 and holding cost is $4 per unit per year.The cost-minimizing solution for this product is to order

In the basic EOQ model,if D = 6000 per year,S = $100,H = $5 per unit per month,the economic order quantity is approximately

A certain type of computer costs $1,000,and the annual holding cost is 25%.Annual demand is 10,000 units,and the order cost is $150 per order.What is the approximate economic order quantity?

Units of safety stock are additions to the reorder point that allow for variability in the rate of demand,the length of lead time,or both.

Clement Bait and Tackle has been buying a chemical water conditioner for its bait (to help keep its baitfish alive)in an optimal fashion using EOQ analysis.The supplier has now offered Clement a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly.Current data for the problem are: D = 720 units per year;S = $6.00,I = 20% per year;P = $25. a.What is the EOQ at the current behaviour? b.What is the annual total cost,including product cost,of continuing their current behaviour? c.What are the annual total costs,if they accept either of the proposed discounts? d.At the cheapest of the total costs,are carrying costs equal to ordering costs? Explain.

Define service level.

Describe the costs associated with ordering and maintaining inventory.

What are the main reasons that an organization has inventory?

Q is to ________ systems as P is to ________ systems.

Assume two inventory problems with identical demand,holding cost,and setup cost.In one,goods arrive instantly,but in the other goods arrive at a measurable rate.Which of these problems will have the larger optimal order quantity? Why?

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car.Paper sales are normally distributed,with a mean of 100 and standard deviation of 10.He sells papers for $.5 and pays $.30 for them.Unsold papers are trashed with no salvage value.How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?

What are the techniques to control service inventories?

The proper quantity of safety stock is typically determined by

Service level is