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William Beville's computer training school, in , stocks workbooks with the following characteristics: Demand D= 19,500 units/year Ordering cost S = $25/order Holding cost H = $4/unit/year

William Beville's computer training school, in , stocks workbooks with the following characteristics: Demand D= 19,500 units/year Ordering cost S = $25/order Holding cost H = $4/unit/year

Practical Management Science
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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Answer 12.7a-c

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Barbara Flynn's company has compiled the following 12.5 ata on a small set of products: ITEM A B C D E ANNUAL DEMAND ITEM NUMBER E102 D23 D27 R02 R19 $107 $123 U11 U23 V75 100 75 50 200 150 Perform an ABC analysis on her data. PX 12.6 Lynn Fish opened a new beauty-products retail store. There are numerous items in inventory, and Lynn knows that there are costs associated with inventory. However, because her time is limited, she cannot carefully evaluate the inventory policy for all products. Lynn wants to classify the items according to dol- lars invested in them. The following table provides information about the 10 items that she carries: UNIT COST $300 100 50 100 65 UNIT COST $4 $16 $8 $2 $8 $12 $1 $7 $1 $14 DEMAND (UNITS) 800 2,400 700 1,000 200 500 1,200 800 Use ABC analysis to classify these items into categories A, B, and C. PX 1,500 2,500 Problems 12.7-12.40 relate to Inventory Models for Independent Demand • 12.7 William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D= 19,500 units/year Ordering cost S = $25/order Holding cost H = $4/unit/year a) Calculate the EOQ for the workbooks. b) What are the annual holding costs for the workbooks? c) What are the annual ordering costs? PX 12.8 If D= 8,000 per month, S = $45 per order, and H = $2 per unit per month, a) What is the economic order quantity? b) How does your answer change if the holding cost doubles? c) What if the holding cost drops in half? PX 12.9 Leilani Lavender's law office has traditionally ordered ink refills 60 units at a time. The firm estimates that carrying cost is 40% of the $10 unit cost and that annual demand is about 240 units per year. The assumptions of the basic EOQ model are thought to apply. a) For what value of ordering cost would its action be optimal? b) If the true ordering cost turns out to be much greater than your answer to (a), what is the impact on the firm's ordering policy? CHAPTER 12 INVENTORY MANAGEMENT 523 • 12.10 Matthew Liotine's Dream Store sells beds and as- sorted supplies. His best-selling bed has an annual demand of 400 units. Ordering cost is $40; holding cost is $5 per unit per year. a) To minimize the total cost, how many units should be ordered each time an order is placed? b) If the holding cost per unit was $6 instead of $5, what would be the optimal order quantity? PX • 12.11 Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units. Southeastern esti- mates its annual holding cost for this item to be $25 per unit. The cost to place and process an order from the supplier is $75. The company operates 300 days per year, and the lead time to receive an order from the supplier is 2 working days. a) Find the economic order quantity. b) Find the annual holding costs. c) Find the annual ordering costs. d) What is the reorder point? PX 12.12 Lead time for one of your fastest-moving products is 21 days. Demand during this period averages 100 units per day. a) What would be an appropriate reorder point? b) How does your answer change if demand during lead time doubles? c) How does your answer change if demand during lead time drops in half? • 12.13 Annual demand for the notebook binders at Duncan's Stationery Shop is 10,000 units. Dana Duncan operates her busi- ness 300 days per year and finds that deliveries from her supplier generally take 5 working days. a) Calculate the reorder point for the notebook binders that she stocks. b) Why is this number important to Duncan? ..12.14 Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 6,000 units per year. The cost of each unit is $100, and the inventory carrying cost is $10 per unit per year. The aver- age ordering cost is $30 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 120 units. (This is a corporate operation, and there are 250 working days per year.) a) What is the EOQ? b) What is the average inventory if the EOQ is used? c) What is the optimal number of orders per year? d) What is the optimal number of days in between any two orders? e) What is the annual cost of ordering and holding inventory? f) What is the total annual inventory cost, including the cost of the 6,000 units? PX .. 12.15 Jordin Henry's machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: 2,500 $1.50 $18.75 2 days 250 Annual demand: Holding cost per bracket per year: Order cost per order: Lead time: Working days per year: a) Given the information, what would be the economic order quantity (EOQ)? b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?
Transcribed Image Text:Barbara Flynn's company has compiled the following 12.5 ata on a small set of products: ITEM A B C D E ANNUAL DEMAND ITEM NUMBER E102 D23 D27 R02 R19 $107 $123 U11 U23 V75 100 75 50 200 150 Perform an ABC analysis on her data. PX 12.6 Lynn Fish opened a new beauty-products retail store. There are numerous items in inventory, and Lynn knows that there are costs associated with inventory. However, because her time is limited, she cannot carefully evaluate the inventory policy for all products. Lynn wants to classify the items according to dol- lars invested in them. The following table provides information about the 10 items that she carries: UNIT COST $300 100 50 100 65 UNIT COST $4 $16 $8 $2 $8 $12 $1 $7 $1 $14 DEMAND (UNITS) 800 2,400 700 1,000 200 500 1,200 800 Use ABC analysis to classify these items into categories A, B, and C. PX 1,500 2,500 Problems 12.7-12.40 relate to Inventory Models for Independent Demand • 12.7 William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D= 19,500 units/year Ordering cost S = $25/order Holding cost H = $4/unit/year a) Calculate the EOQ for the workbooks. b) What are the annual holding costs for the workbooks? c) What are the annual ordering costs? PX 12.8 If D= 8,000 per month, S = $45 per order, and H = $2 per unit per month, a) What is the economic order quantity? b) How does your answer change if the holding cost doubles? c) What if the holding cost drops in half? PX 12.9 Leilani Lavender's law office has traditionally ordered ink refills 60 units at a time. The firm estimates that carrying cost is 40% of the $10 unit cost and that annual demand is about 240 units per year. The assumptions of the basic EOQ model are thought to apply. a) For what value of ordering cost would its action be optimal? b) If the true ordering cost turns out to be much greater than your answer to (a), what is the impact on the firm's ordering policy? CHAPTER 12 INVENTORY MANAGEMENT 523 • 12.10 Matthew Liotine's Dream Store sells beds and as- sorted supplies. His best-selling bed has an annual demand of 400 units. Ordering cost is $40; holding cost is $5 per unit per year. a) To minimize the total cost, how many units should be ordered each time an order is placed? b) If the holding cost per unit was $6 instead of $5, what would be the optimal order quantity? PX • 12.11 Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units. Southeastern esti- mates its annual holding cost for this item to be $25 per unit. The cost to place and process an order from the supplier is $75. The company operates 300 days per year, and the lead time to receive an order from the supplier is 2 working days. a) Find the economic order quantity. b) Find the annual holding costs. c) Find the annual ordering costs. d) What is the reorder point? PX 12.12 Lead time for one of your fastest-moving products is 21 days. Demand during this period averages 100 units per day. a) What would be an appropriate reorder point? b) How does your answer change if demand during lead time doubles? c) How does your answer change if demand during lead time drops in half? • 12.13 Annual demand for the notebook binders at Duncan's Stationery Shop is 10,000 units. Dana Duncan operates her busi- ness 300 days per year and finds that deliveries from her supplier generally take 5 working days. a) Calculate the reorder point for the notebook binders that she stocks. b) Why is this number important to Duncan? ..12.14 Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 6,000 units per year. The cost of each unit is $100, and the inventory carrying cost is $10 per unit per year. The aver- age ordering cost is $30 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 120 units. (This is a corporate operation, and there are 250 working days per year.) a) What is the EOQ? b) What is the average inventory if the EOQ is used? c) What is the optimal number of orders per year? d) What is the optimal number of days in between any two orders? e) What is the annual cost of ordering and holding inventory? f) What is the total annual inventory cost, including the cost of the 6,000 units? PX .. 12.15 Jordin Henry's machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: 2,500 $1.50 $18.75 2 days 250 Annual demand: Holding cost per bracket per year: Order cost per order: Lead time: Working days per year: a) Given the information, what would be the economic order quantity (EOQ)? b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?
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