EBK PRINCIPLES OF OPERATIONS MANAGEMENT
EBK PRINCIPLES OF OPERATIONS MANAGEMENT
11th Edition
ISBN: 9780135175859
Author: Munson
Publisher: VST
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 12, Problem 28P

a)

Summary Introduction

To determine: The Economic order quantity.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

a)

Expert Solution
Check Mark

Answer to Problem 28P

The economic order quantity for vendor A is 336.07 units and for vendor B is 335.08 units.

Explanation of Solution

Given information:

Annualdemand,D=800×12units=9,600unitsOrdercost,S=$50perorderAnnual holding cost=50%ofpurchaseprice

Vendor 1
Quantity Price
 1-499 $17.00
 500-999 $16.75
 1,000+ $16.50
Vendor 2
1-399  $17.10
 400-799 $16.85
 800-1,199 $16.60
1,200+  $16.25

Formula:

EOQ,Q=2DSH

Where

D=DemandS=OrderingcostH=Holdingcost

Calculation of Economic order quantity:

For vendor 1 with quantity 1-499:

=2×9,600×500.5×17=336.07units

EOQ is calculated by multiplying 2, 9600 and 50 and dividing the resultant 0.5×17 and taking square root which gives 336.07 units.

Same calculation procedure follows for the rest of the quantities and the result is,

D 9600
S $50.00
Vendor 1
Quantity Price H EOQ
 1-499 $17.00 $8.50 336.07
 500-999 $16.75 $8.38 338.57
 1,000+ $16.50 $8.25 341.12
Vendor 2
1-399  $17.10 $8.55 335.08
 400-799 $16.85 $8.43 337.56
 800-1,199 $16.60 $8.30 340.09
1,200+  $16.25 $8.13 343.74

Working:

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 12, Problem 28P , additional homework tip  1

Based on the above calculation, the EOQ for vendor A is 336.07 units and for vendor B is 335.08 units.

Hence, the economic order quantity for vendor A is 336.07 units and for vendor B is 335.08 units.

b)

Summary Introduction

To determine: The quantities to be ordered and supplier to be selected.

b)

Expert Solution
Check Mark

Answer to Problem 28P

Vendor 2 should be selected at 1,200 units of ordering quantities

Explanation of Solution

Given information:

Annualdemand,D=800×12units=9,600unitsOrdercost,S=$50perorderAnnual holding cost=50%ofpurchaseprice

Vendor 1
Quantity Price
 1-499 $17.00
 500-999 $16.75
 1,000+ $16.50
Vendor 2
1-399  $17.10
 400-799 $16.85
 800-1,199 $16.60
1,200+  $16.25

Formula:

Totalcost=PD+Q2×H+DQ×S

Calculation of ordering quantities:

D 9600
S $50.00
Vendor 1
Quantity Price H EOQ Holding cost Ordering cost Purchase cost Total cost
336 $17.00 $8.50 336.07 $1,428.00 $1428.6 $163,200.00 $166056.57
500 $16.75 $8.38 338.57 $2,093.75 $960.0 $160,800.00 $163853.75
1000 $16.50 $8.25 341.12 $4,125.00 $480.0 $158,400.00 $163005.00
Vendor 2
335 $17.10 $8.55 335.08 $1,432.13 $1432.8 $164,160.00 $167024.96
400 $16.85 $8.43 337.56 $1,685.00 $1200.0 $161,760.00 $164645.00
800 $16.60 $8.30 340.09 $3,320.00 $600.0 $159,360.00 $163280.00
1200 $16.25 $8.13 343.74 $4,875.00 $400.0 $156,000.00 $161275.00

Table 1

Working:

EBK PRINCIPLES OF OPERATIONS MANAGEMENT, Chapter 12, Problem 28P , additional homework tip  2

Based on the above calculations it can be inferred that Vendor 2 can be selected because the total cost is least at 1,200 ordering quantities (refer table1).

Hence, vendor 2 should be selected at 1,200 units of ordering quantities.

c)

Summary Introduction

To determine: The total cost for most economic order quantities.

c)

Expert Solution
Check Mark

Answer to Problem 28P

The optimum ordering quantity is 1200 units and total annual cost is $161275.00.

Explanation of Solution

Given information:

Annualdemand,D=800×12units=9,600unitsOrdercost,S=$50perorderAnnual holding cost=50%ofpurchaseprice

Vendor 1
Quantity Price
 1-499 $17.00
 500-999 $16.75
 1,000+ $16.50
Vendor 2
1-399  $17.10
 400-799 $16.85
 800-1,199 $16.60
1,200+  $16.25

Calculation of total cost:

Table 1 provides the calculation for total cost.

Hence, the optimum ordering quantity is 1200 units and total annual cost is $161275.00.

d)

Summary Introduction

To determine: The factors to be considered besides total cost.

d)

Expert Solution
Check Mark

Explanation of Solution

Given information:

Annualdemand,D=800×12units=9,600unitsOrdercost,S=$50perorderAnnual holding cost=50%ofpurchaseprice

Vendor 1
Quantity Price
 1-499 $17.00
 500-999 $16.75
 1,000+ $16.50
Vendor 2
1-399  $17.10
 400-799 $16.85
 800-1,199 $16.60
1,200+  $16.25

Factors to be considered besides total cost:

Apart from making decision based on total cost some other factor also have to be considered for making decisions to avoid uncertainty. Some other factors like perishability of the chemicals, the environment in which the chemicals are stored, storage space to handle 1,200 pounds of chemical have to be taken into account.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
You may need to use the appropriate technology to answer this question. An event hall that hosts public lectures, book readings, poetry slams, and other similar events uses a one-week periodic review inventory system for the throat lozenges that it stocks for its patrons. A two-day lead time is needed for any order, and the event hall is willing to tolerate an average of one stock-out per year. (a) Using the event hall's service guideline, what is the probability of a stock-out associated with each replenishment decision? (Round your answer to four decimal places.) (b) What is the replenishment level if demand during the review period plus lead-time period is normally distributed with a mean of 50 units and a standard deviation of 12 units? (Round your answer to the nearest integer.) (c) What is the replenishment level if demand during the review period plus lead-time period is uniformly distributed between 45 and 95 units? (Round your answer to the nearest integer.)
provide scholarly research on the importance of internal risk assessement and auditng process in relation to US bank Cititbank loosing USD500 million in August 2020
The annual requirements for a particular raw material are 2,000 units costing Re. 1 each to the manufacturer. The ordering cost is Rs. 10 per order and the carrying cost 16% per annum of the average inventory value. Find and explain the economic order quantity and the total inventory cost per annum.

Chapter 12 Solutions

EBK PRINCIPLES OF OPERATIONS MANAGEMENT

Ch. 12 - Prob. 10DQCh. 12 - Prob. 11DQCh. 12 - Explain the following: All things being equal, the...Ch. 12 - Prob. 13DQCh. 12 - Prob. 14DQCh. 12 - Prob. 15DQCh. 12 - When demand is not constant, the reorder point is...Ch. 12 - Prob. 17DQCh. 12 - State a major advantage, and a major disadvantage,...Ch. 12 - L. Houts Plastics it a large manufacturer of...Ch. 12 - Prob. 2PCh. 12 - Jean-Mane Bourjollys restaurant has the following...Ch. 12 - Lindsay Electronics, a small manufacturer of...Ch. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - William Sevilles computer training school, in...Ch. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Matthew Liotines Dream Store sells beds and...Ch. 12 - Southeastern Bell stocks a certain switch...Ch. 12 - Lead time for one of your fastest-moving products...Ch. 12 - Annual demand for the notebook binders at Duncans...Ch. 12 - Thomas Kratzer is the purchasing manager for the...Ch. 12 - Joe Henrys machine shop uses 2,500 brackets during...Ch. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Cesar Rego Computers, a Mississippi chain of...Ch. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - M. P. VanOyen Manufacturing has gone out on bid...Ch. 12 - Chris Sandvig Irrigation, Inc., has summarized the...Ch. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Barbara Flynn is in charge of maintaining hospital...Ch. 12 - Prob. 42PCh. 12 - Authentic Thai rattan chairs (shown in the photo)...Ch. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Gainesville Cigar stocks Cuban agars that have...Ch. 12 - A gourmet coffee shop in downtown San Francisco is...Ch. 12 - Prob. 50PCh. 12 - Prob. 51PCh. 12 - Henrique Correas bakery prepares all its cakes...Ch. 12 - Prob. 53PCh. 12 - Prob. 1CSCh. 12 - Prob. 2CSCh. 12 - Prob. 3CSCh. 12 - Prob. 1.1VCCh. 12 - Prob. 1.2VCCh. 12 - Prob. 1.3VCCh. 12 - Prob. 1.4VCCh. 12 - Prob. 1.5VCCh. 12 - Prob. 1.6VCCh. 12 - Prob. 1.7VCCh. 12 - Prob. 2.1VCCh. 12 - Prob. 2.2VCCh. 12 - Prob. 2.3VCCh. 12 - Prob. 2.4VCCh. 12 - Inventory Control at Wheeled Coach Controlling...Ch. 12 - Prob. 3.2VCCh. 12 - Inventory Control at Wheeled Coach Controlling...
Knowledge Booster
Background pattern image
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Text book image
MARKETING 2018
Marketing
ISBN:9780357033753
Author:Pride
Publisher:CENGAGE L
Text book image
Contemporary Marketing
Marketing
ISBN:9780357033777
Author:Louis E. Boone, David L. Kurtz
Publisher:Cengage Learning
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY