Leilani Lavender's law office has traditionally ordered ink refills 70 units at a time. The firm estimates that carrying cost is 40% of the $9 unit cost and that annual demand is about 245 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal? a) For what value of ordering cost would its action be optimal? Its action would be optimal given an ordering cost of $ per order (round your response to two decimal places). b) If the true ordering cost turns out to be much less than your answer to part (a), what is the impact on the firm's ordering policy? O A. The order quantity should be decreased. OB. The order quantity should be increased. OC. The order quantity should not be changed.

Leilani Lavender's law office has traditionally ordered ink refills 70 units at a time. The firm estimates that carrying cost is 40% of the $9 unit cost and that annual demand is about 245 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal? a) For what value of ordering cost would its action be optimal? Its action would be optimal given an ordering cost of $ per order (round your response to two decimal places). b) If the true ordering cost turns out to be much less than your answer to part (a), what is the impact on the firm's ordering policy? O A. The order quantity should be decreased. OB. The order quantity should be increased. OC. The order quantity should not be changed.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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Palin's Muffler Shop has one standard muffler that fits a large variety of cars. The shop wishes to establish a periodic review system to manage inventory of this standard muffler. Use the information in the following table to determine the optimal inventory target level (or order-up-to level). Ordering cost Service probability Annual demand 3,750 mufflers $ 60 92 % per order mufflers per working day per muffler % of item value working days Standard deviation of daily demand Item cost $39.00 working days per year Lead time 3 Working days Annual holding cost Review period 31 250 20 a. What is the optimal target level (order-up-to level)? (Use Excel's NORMSINV() function to find the correct critical value for the given a-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.) Optimal target level b. If the service probability requirement is 92 percent, the optimal target level will: O Stay the same Decrease O…
Huehn-Brown Products in St. Petersburg offers thefollowing discount schedule for its 4-by-8-foot sheets of quality plywood. Home Sweet Home Company orders plywood from HuehnBrown.Home Sweet Home has an ordering cost of$45. Carryingcost is 20%, and annual demand is 100 sheets. What do you recommend?
Norris Harrell’s Computer Store in San Fernando sells a printer for $200. The annual demand for this is 600 units, with a standard deviation of 1.5 units daily. The holding cost is $20, while the cost of ordering is $60 per order. Currently the company is ordering 12 times per year. There are 250 working days per year and the lead time is 10 days. a. Given the current policy of ordering, what is the total ordering and holding costs? b. If the company uses the absolute best inventory policy, what would be the total ordering and holding costs?
Consider again the kitty litter ordering policy for Sam’s Pet Hotel in Problem 13. Suppose that the weekly demand forecast of 90 bags is incorrect and actual demand averages only 60 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? Suppose that actual demand is 60 bags but that ordering costs are cut to only $6 by using the Internet to automate order placing. However, the buyer does not tell anyone, and the EOQ is not adjusted to reflect this reduction in S. How much higher will total costs be, compared to what they could be if the EOQ were adjusted?
BIKO is a bike retailer located in the outskirts of Paris. BIKO purchases bikes from PMX in orders of 250 bikes which is the current economic order quantity. PMX is now offering the following bulk discounts to its customers: 2% discount on orders above 200 units 4% discount on orders above 500 units 6% discount on orders above 600 units BIKO is wondering if the EOQ model is still the most economical and whether increasing the order size would actually be more beneficial. Following information is relevant to forming the decision: Annual demand is 5000 units Ordering cost is $100 per order Annual holding cost is comprised of the following: 5% insurance premium for the average inventory held during the year calculated using the net purchase price Warehousing cost of $6 per unit Purchase price is $200 per unit before discount (Hint: We need to compare the total inventory cost of the order quantities at the various discount levels with that of the economic order quantity)
An eyeglass retailer buys lenses from a supplier at $100 each. The retailer orders 250 lens pairs every year and the ordering cost is $36. Carrying costs per year (based on average inventory) are estimated to be 20% for each pair. The supplier offers a 10% on order quantities of 50 or more lens pairs. Determine the best order quantity and total cost
The Petroco Company uses a highly toxic chemical in one of its manufacturing processes. It must have the product delivered by special cargo trucks designed for safe shipment of chemicals. As such, ordering (and delivery) costs are relatively high, at $2,600 per order. The chemical product is packaged in 1-gallon plastic containers. The cost of holding the chemical in storage is $50 per gallon per year. The annual demand for the chemical, which is constant over time, is 2,000 gallons per year. The lead time from time of order placement until receipt is 10 days. The company operates 310 working days per year. Compute the optimal order quantity, the total minimum inventory cost, and the reorder point.
Please do not give solution in image formate thanku. Weekly demand for HP printers at a Sam's Club store is normally distributed, with a mean of250 and a standard deviation of 150. The store manager continuously monitors inventory andcurrently orders 1,000 printers each time the inventory drops to 600 printers. HP currentlytakes two weeks to fill an order. How much safety inventory does the store carry? What CSLdoes Sam's Club achieve as a result of this policy? What fill rate does the store achieve?Ex:. Return to the Sam's Club store in . Assume that the supply lead time from HP isnormally distributed, with a mean of 2 weeks and a standard deviation of 1.5 weeks. Howmuch safety inventory should Sam's Club carry if it wants to provide a CSL of 95 percent?
The Bucks Grande exhibition baseball team plays 50 weekseach year and uses an average of 350 baseballs per week.The team orders baseballs from Coopers-Town, Inc., aball manufacturer noted for six-sigma-level consistency andhigh product quality. The cost to order baseballs is $100 perorder and the annual holding cost per ball is 38 percent of thepurchase price. Coopers-Town’s price structure is:Order Quantity Price per Unit1–999 $7.501,000–4999 $7.255,000 or more $6.50a. How many baseballs should the team buy per order?b. What is the total annual cost associated with the bestorder quantity?c. Coopers-Town, Inc., discovers that, owing to specialmanufacturing processes required for the Buck’s base-balls, it has underestimated the setup time required on acapacity-constrained piece of machinery. Coopers-Townadds another category to the price structure to provide anincentive for larger orders and thereby hopes to reducethe number of setups required. If the…
Palin’s Muffler Shop has one standard muffler that fits a large variety of cars. The shop wishes to establish a periodic review system to manage inventory of this standard muffler. Use the information in the following table to determine the optimal inventory target level (or order-up-to level). Annual demand 2,750 mufflers Ordering cost $ 35 per order Standard deviation of daily demand 6 mufflers per working day Service probability 76 % Item cost $ 28.00 per muffler Lead time 4 working days Annual holding cost 22 % of item value Working days 275 per year Review period 21 working days a. What is the optimal target level (order-up-to level)? If the service probability requirement is 93 percent, the optimal target level will: Increase Decrease Stay the same
Palin's Muffler Shop has one standard muffler that fits a large variety of cars. The shop wishes to establish a periodic review system to manage inventory of this standard muffler. Use the information in the following table to determine the optimal inventory target level (or order-up-to level). $ 35 Ordering cost Service probability Lead time per order 2,970 6. mufflers Annual demand Standard deviation of daily demand mufflers per working day 89 % working days per muffler * of item value working days $21.00 4 Item cost 36 Working days 270 per year Annual holding cost Review period 22 a. What is the optimal target level (order-up-to level)? (Use Excel's NORMSINV) function to find the correct critical value for the given a-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.) Optimal target level b. If the service probability requirement is 90 percent, the optimal target level will: O Increase O Decrease O Stay…