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QUESTION 1 Refer to the table below, a company is considering a proposal to reduce its order cycle time and make the cycle time more reliable. If the cost per unit kept in inventory is $240.00 with a 25% inventory carrying cost, calculate the savings due to a reduced cost of safety stock. Old P r o c e s s New Process Cu Z Average Order Cycle Time 5 3 0.7 0.67449 Std Dev of OCT 4 1 0.8 0.841621 Demand per day 250 250 0.8 1.036433 Service Level 95.0 0 % 95.00% 0.9 1.281552 0.9 1.644854 0.9 1.959964

0.9 3.090232 0.9 3.719016 a. $47,200 b. $69,700 c. $89,000 d. $136,200 e. $173,700 QUESTION 2 A small retailer sells an average of 42 boxes of macaroni and cheese per week. The delivery driver replenishes the stock every two weeks, with a standard deviation of 5 boxes of demand over the order period. This retailer wants to avoid stockout 99% of the time. (i) What is the restocking level? (ii) When the delivery driver stopped-by there were 16 boxes left on the shelf, how many boxes will the driver restock Cumulative Distribution Z 0.75 0.67 0.8 0.84 0.85 1.04 0.9 1.28 0.95 1.64 0.975 1.96 0.99 2.33

0.999 3.09 0.9999 3.72 (i) 84; (ii) 72 (i) 84; (ii) 79 (i) 89; (ii) 73 (i) 96; (ii) 80 (i) 96, (ii) 91 QUESTION 6 A small retailer sells an average of 60 boxes of macaroni and cheese per week. The delivery driver replenishes the stock every three weeks, with a standard deviation of 10 boxes of demand over the order period. This retailer wants to avoid stockout 97.5% of the time. (i) What is the restocking level? (ii) When the delivery driver stopped-by there were 15 boxes left on the shelf, how many boxes will the driver restock Cumulative Distribution Z 0.75 0.67 0.8 0.84 0.85 1.04 0.9 1.28 0.95 1.64 0.975 1.96 0.99 2.33 0.999 3.09

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0.9999 3.72 (i) 180; (ii) 160 (i) 180; (ii) 165 (i) 180; (ii) 170 (i) 200; (ii) 180 (i) 200; (ii) 185 QUESTION 3 Frys, a regional electronics retailer, estimates that sells 20,800 4-packs of Energizer AA Alkaline batteries per year (or 400 per week). Each 4-pack of batteries costs the retailer $4.00; with a carrying cost rate of 25%; and ordering costs of $104.00 per order. Calculate the optimum order period—in terms of weeks a. 1 week b. 4 weeks c. 13 weeks d. 52 weeks 2x20800x104 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 their optimal order quantity? a. 150

b. 200 c. 500 d. 1,000 e. 2,000 raiz cuadrada ( 2x4000x25)/5 QUESTION 5 Inventory carrying costs rate include the following: a. direct material labor and overhead b. capital cost c. storage space cost d. all the above e. b and c only 1 points QUESTION 6 Given the following information, determine the inventory carrying cost rate Direct materials, labor & overhead $800 Inbound Freight $40 Labor 20 Space 25 Insurance 3

Interest 40 Taxes 8 Loss & Damage 32 Obsolescence 8 a. 22% b. 88% c. 100% d. 122% e. 176% Capital cost can focuses on the cost capital tied up in ________and the resulting lost opportunity from investing elsewhere. a. distribution centers b. WIP c. plants d. inventory for QUESTION 1 c. $89,000 Thus, the savings due to a reduced cost of safety stock is $89,000.

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$89,000 = $240.00 × (0.9 + 0.95 + 0.8 + 0.75) Explanation: $47,200 = $240.00 × (0.841621 + 0.75) $69,700 = $240.00 × (0.85 + 0.8 + 0.75) $89,000 = $240.00 × (0.9 + 0.95 + 0.8 + 0.75) $136,200 = $240.00 × (0.975 + 0.99 + 0.95 + 0.9 + 0.8 + 0.75) $173,700 = $240.00 × (0.9999 + 1.036433 + 1.644854 + 0.95 + 0.9 + 0.8 + 0.75) -The savings due to a reduced cost of safety stock is calculated by multiplying the cost per unit kept in inventory by the sum of the old and new process cycle times. -Thus, the savings due to a reduced cost of safety stock is $89,000. $89,000 = $240.00 × (0.9 + 0.95 + 0.8 + 0.75) -The company is considering a proposal to reduce its order cycle time and make the cycle time more reliable. If the cost per unit kept in inventory is $240.00 with a 25% inventory carrying cost, the savings due to a reduced cost of safety stock would be $89,000. The company is considering a proposal to reduce its order cycle time and make the cycle time more reliable. If the cost per unit kept in inventory is $240.00 with a 25% inventory carrying cost, the savings due to a reduced cost of safety stock would be $89,000. This is because the new process has a shorter and more reliable cycle time, which reduces the amount of safety stock that needs to be kept on hand.

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