The manager of a car wash received a revised price list from the vendor who supplies soap, and a promise of a shorter lead time fordeliveries. Formerly the lead time was four days, but now the vendor promises a reduction of 25 percent in that time. Annual usage ofsoap is 4,500 gallons. The car wash is open 360 days a year. Assume that daily usage is normal, and that it has a standard deviation of2 gallons per day. The ordering cost is $30 and annual carrying cost is $3 a gallon. The revised price list (cost per gallon) is shown inthe following table:Quantity1 - 399400 799800 +Unit Price$2.001.701.62Click here for the Excel Data Filea. What order quantity is optimal? (Round your intermediate calculations to 2 decimal places and final answer to the nearest wholenumber.)Optimal order quantityROPb. What ROP is appropriate if the acceptable risk of a stockout is 1.5 percent? (Do not round intermediate calculations. Round yourfinal answer to 2 decimal places.)gallonsgallons

Inventory management is one of the essential parts of running a business that includes monitoring an…

Answered: The manager of a car wash received a…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Daily demand for product sample kits is normally distributed with a mean of 35 units and a standard deviation of 4. Supply is virtually certain with a lead time of 9 days. The cost of placing an order is $20, and annual carrying costs for one kit is 25 percent. The price of one kit is $12.50. Assume a year has 365 days.If a 99% service level is desired, what is average inventory on hand? If demand had no variation, what would the reorder point be?
The manager of a car wash received a revised price list from the vendor who supplies soap, anda promise of a shorter lead time for deliveries. Formerly the lead time was four days, but now thevendor promises a reduction of 25 percent in that time. Annual usage of soap is 4,500 gallons. Thecar wash is open 360 days a year. Assume that daily usage is normal, and that it has a standarddeviation of 2 gallons per day. The ordering cost is $30 and annual carrying cost is $3 a gallon.The revised price list (cost per gallon) is shown in the following table.Quantity Unit Price1−399 $2.00400−799 1.70800 + 1.62a. What order quantity is optimal?b. What ROP is appropriate if the acceptable risk of a stockout is 1.5 percent?
Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. In the second year, Fisk Corporation finds that it can reduce ordering costs to $1 per order, but carrying costs will stay the same at $1.50 per unit. a-1. What is the economic ordering quantity for the second year? Economic ordering quantity (EOQ) a-2. How many orders will be placed during the second year? Number of orders a-3. What will the average inventory be for the second year? Average inventory Total costs units units a-4. What is the total cost of ordering and carrying inventory for second year? LA
Charlie’s Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops by every four weeks to take orders. Because the orders are shipped directly from Italy, they take three weeks to arrive. Charlie’s Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 30 pounds. Charlie’s prides itself on offering only the best-quality ingre- dients and a high level of service, so it wants to ensure a 98 percent probability of not stocking out on pepperoni. Assume that the sales representative just walked in the door and there are currently 500 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order?
A boutique cafe in the city operates 365 days a year. The cafe has an annual demand for food products of 60,000 units with an equal daily demand across the year with the standard deviation of the daily demand of 60 units. The supplier of the products charges the cafe the base rate of the products’ price of $200 per unit and the base rate for the ordering cost including delivery of $500 per order. The supplier has agreed that it will take four days to fulfill (deliver) the orders for the cafe. The products are kept in the cafe's store, and the annual holding cost per unit is 5% of the product’s unit price. In order to build a long-term relationship, the supplier offers discounted prices for different order quantities. For any order quantity below 2,000 units, the products and the ordering cost will be priced at the base rate. For any order quantity between 2,000 and 4,999 units, the cafe will receive a 5% discount on the base rate of the products’ price and a 10% discount on the base…
Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 97,200 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. What is the economic ordering quantity? How many orders will be placed during the year? What will the average inventory be? What is the total cost of ordering and carrying inventory?
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?
Charlie’s Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops every four weeks to take orders. Because the orders are shipped directly from Italy, they take three weeks to arrive. Charlie’s Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 30 pounds. Charlie’s prides itself on offering only the best quality ingredientsand a high level of service, so it wants to ensure a 98 percent probability of not stocking out on pepperoni. Assume that the sales representative just walked in the door and there are currently 500 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order? (Answer in Appendix D)
You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 350 units and a standard deviation of 15 units. It is purchased from a wholesaler at a cost of $25.00 per unit. The supply lead time is 7 weeks. Placing an order costs $55.00, and the inventory carrying rate per year is 15 percent of the item's cost. Your firm operates 6 days per week, 50 weeks per year. Refer to the standard normal table The table below shows the total area under the normal curve for a point that is Z standard deviations to the right of the mean. Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359 0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5754 0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141…
You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 200 units and a standard deviation of 16 units. It is purchased from a wholesaler at a cost of $12.50 per unit. You are using a continuous review system to control this inventory. The supply lead time is 4 weeks. Placingan order costs $50, and the inventory carrying rate per year is 20 percent of the item’s cost. Your firm operates 5 days per week, 50 weeks per year.a. What is the optimal ordering quantity for this item?b. How many units of the item should be maintained as safety stock for 99 percent protection against stockouts during an order cycle?c. If supply lead time can be reduced to 2 weeks, what is the percent reduction in the number of units maintained as safety stock for the same 99 percent stockout protection?d. If through appropriate sales promotions, the demand variability is reduced so that the standard deviation of weekly…
David's Delicatessen flies in Hebrew National salamis regularly to satisfy a growing demand for the salamis in Silicon Valley. The owner, David Gold, estimates that the demand for the salamis is pretty steady at 175 per month. The salamis cost Gold $1.85 each. The fixed cost of calling his brother in New York and having the salamis flown in is $200. It takes three weeks to receive an order. Gold's accountant, Irving Wu, recommendsan annual cost of capital of 22 percent, a cost of shelf space of 3 percent of the value of the item, and a cost of 2 percent of the value for taxes and insurance. How many salamis should Gold have on hand when he phones his brother to send another shipment?
David’s Delicatessen flies in Hebrew National salamis regularly to satisfy a growing demand for the salamis in Silicon Valley. The owner, David Gold, estimates that the demand for the salamis is pretty steady at 175 per month. The salamis cost Gold $1.85 each. The fixed cost of calling his brother in New York and having the salamis flown in is $200. It takes three weeks to receive an order. Gold’s accountant, Irving Wu, recommends an annual cost of capital of 22 percent, a cost of shelf space of 3 percent of the value of the item, and a cost of 2 percent of the value for taxes and insurance.a. How many salamis should Gold have flown in and how often should he order them?b. How many salamis should Gold have on hand when he phones his brother to send another shipment?c. Suppose that the salamis sell for $3 each. Are these salamis a profitable item for Gold? If so, what annual profit can he expect to realize from this item? (Assume that he operates the system optimally.)d. If the salamis…

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