Exam 18: Special Inventory Models

Scenario C.2 Egan Schranz sells Klammelhoffer skis out of his store in the Alps.The store makes a $75 profit per unit sold during the ski season,but it will take a $25 loss per unit if sold after the season is over.The following discrete probability distribution has been estimated for the season's demand. -Use the information in Scenario C.2.What is the best order quantity?

A production manager uses the economic lot size approach to determine the batch size for a product with an annual demand of 20,000 units per year.The setup cost for each batch is $50 and once the setup is complete,the product may be produced at the rate of 800 units per day.There is a holding cost of $2 per unit per year and the plant operates on a 250-day production year.If the machine used to produce this product is needed for another item and it takes one day to set up regardless of product,how many production days are available for production of the new item?

Consider a noninstantaneous replenishment situation in which the production rate is 100 units per day,the demand rate is four units per day,and the economic production lot size is 500 units.Which of the following statements is TRUE?

When faced with a quantity discount situation,the first EOQ should be calculated using the ________ price.

Why are there discontinuities (areas where the curve jumps up or down and is not smooth)in the total cost curve in the quantity discount model?

Briefly explain why the economic production lot size (ELS)is actually larger than the EOQ when there are noninstantaneous replenishments.

The pile of inventory accumulated in an economic production lot size situation is ________ than the lot size dictated by the ELS calculation.

The need for one-time inventory decisions also can arise in manufacturing plants when ________ items are made to a single order and ________ are high.

In an economic production lot size situation,the production rate is always ________ than the demand rate.

Scenario C.1 Jerry Allison is in charge of production for a small producer of plumbing supplies.The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day.The company produces (and sells)the cricket 300 days per year.Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario C.1.If Jerry chooses to produce batches dictated by the economic production lot size (ELS)model,how many days elapse between the start of consecutive production runs (what is the time between runs or TBO)?

A world traveler prepares to leave the comforts of home for a back to nature visit to Gilligan's Island,where all transactions are conducted in coconuts and the banking system is completely undeveloped.The traveler can buy coconuts for $2 each before the journey.If he fails to bring enough coconuts with him and runs out,he must get some coconuts flown in at a cost of $5 each.If he finishes his vacation and has leftover coconuts he can cash them in when he returns home,but will receive only $1.50 per coconut.What is his loss per unit if he overstocks on coconuts prior to leaving home?

Consider a manufacturer that uses the economic production lot size (ELS)model.What must the relationship be between production rate and demand rate for the producer to realize a maximum inventory that is exactly two-thirds of their lot size?

Warren's Ice Cream makes 4 different flavors of ice cream using their secret process and top secret recipes.Each of their flavors is equally popular and experiences a demand of 5,000 gallons/year.Warren's process is capable of producing 100 gallons/day once they incur the $25 setup cost.The ice cream holding cost is 10% of the $5 per gallon price.Warren's plant runs 250 days a year and stays busy doing so,but management feels they can add another flavor to their product line and increase their revenue.Which of the following statements is appropriate for this scenario?

The ________ is the optimal lot size in situations in which replenishment is not instantaneous.

Scenario C.1 Jerry Allison is in charge of production for a small producer of plumbing supplies.The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day.The company produces (and sells)the cricket 300 days per year.Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. -Use the information in Scenario C.1.What is the economic production lot size (ELS)?

The closer the in-season and after season sales price are,the lower the order placed at the start of the season.

When do one-period decisions on inventory arise in practice?

When facing quantity discounts,the EOQ found with the lowest price level is always the lowest total cost plan.

As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 350 units.Ordering cost is $20 each time an order is placed,and the holding cost is 30 percent of the per-unit price.Your supplier provided the following price schedule. What is the annual cost discrepancy between the optimal order policy and the second best order policy?

If demand exceeds the order quantity in a single period situation,then the payoff is simply the order quantity times the per unit profit.