EP PRIN.OF OPERATIONS MGMT.-MYOMLAB
10th Edition
ISBN: 9780134183848
Author: HEIZER
Publisher: PEARSON CO
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 12, Problem 49P
A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally, with a standard deviation of 15 pounds per day.) After ordering (fixed cost = $16 per order), beans are always shipped from Hawaii within exactly 4 days. Per-pound annual holding costs for the beans are $3.
a) What is the economic order quantity (EOQ) for Kona coffee beans?
b) What are the total annual holding costs of stock for Kona coffee beans?
c) What are the total annual ordering costs for Kona coffee beans?
d) Assume that management has specified that no more than a 1% risk during stockout is acceptable. What should the reorder point (ROP) be?
e) What is the safety stock needed to attain a 1% risk of stockout during lead time?
f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk?
g) If management specified that a 2% risk of stockout during lead time would be acceptable, would the safety stock holding costs decrease or increase?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
help please
Please do not give solution in image format thanku
the economic order quantity (see Chapter 12 for EOQformulas) for its halogen lamps. It currently buys all halogenlamps from Specialty Lighting Manufacturers in Atlanta. Annualdemand is 2,000 lamps, ordering cost per order is $30, and annualcarrying cost per lamp is $12.a) What is the EOQ?b) What are the total annual costs of holding and ordering(managing) this inventory?c) How many orders should D iscount-Mart place with SpecialtyLighting per year?
Chapter 12 Solutions
EP PRIN.OF OPERATIONS MGMT.-MYOMLAB
Ch. 12 - Ethical Dilemma Wayne Hills Hospital in tiny...Ch. 12 - Prob. 1DQCh. 12 - Prob. 2DQCh. 12 - What is the purpose of the ABC classification...Ch. 12 - Prob. 4DQCh. 12 - Explain the major assumptions of the basic EOQ...Ch. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - What impact does a decrease in setup time hive on...
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 - 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 - 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. 51PCh. 12 - Henrique Correas bakery prepares all its cakes...Ch. 12 - Prob. 53PCh. 12 - Prob. 1.1CSCh. 12 - Prob. 1.2CSCh. 12 - Prob. 1.3CSCh. 12 - Prob. 2.1CSCh. 12 - Prob. 2.2CSCh. 12 - Prob. 2.3CSCh. 12 - Managing Inventory at Frito-Lay Frito-Lay hat...Ch. 12 - Prob. 1.2VCCh. 12 - Prob. 1.3VCCh. 12 - Prob. 1.4VCCh. 12 - Prob. 1.5VCCh. 12 - Prob. 1.6VCCh. 12 - Managing Inventory at Frito-Lay Frito-Lay hat...Ch. 12 - Inventory Control at Wheeled Coach Controlling...Ch. 12 - Prob. 2.2VCCh. 12 - Inventory Control at Wheeled Coach Controlling...
Knowledge Booster
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
- EOQ, reorder point, and safety stock Alexis Company uses 937units of a product per year on a continuous basis. The product has a fixed cost of $44 per order, and its carrying cost is $4 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity.arrow_forwardThomas 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 $105, and the inventory carrying cost is $8 per unit per year. The average ordering cost is $31 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 and holding inventory?f. What is the total annual inventory cost, including cost of the 6,000 units?arrow_forwardPalin'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 $39.00 working days per year Lead time 3 Working days Annual holding cost Review period 31 250 20 a. What is the optimal target level (order-up-to level)? (Use Excel's NORMSINV() function to find the correct critical value for the given a-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.) Optimal target level b. If the service probability requirement is 92 percent, the optimal target level will: O Stay the same Decrease O…arrow_forward
- what is the optimal reorder point R? what is the optiman order quantity q?arrow_forwardGreen Grass Industries Limited (GGIL) has used a fixed-time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs, are forcing GGIL, to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such a shortage costs. Table 10 is a random sample of 20 GGIL's items. Table 10. Annual Usage by Value of a sample of GGIL's Inventory Item Number Annual Usage ($) Item Number Annual Usage ($) 1 10,600 11 2,750 2 14,000 12 1,400 3 4,000 13 3,200 4 16,000 14 2,500 5 8,100 15 110,000 1,800 16 14,800 7 84,000 17 9,500 8. 890 18 1,700 9 940 19 3,700 10 94,000 20 12,500 a) What would you recommend GGIL to do to cut back its labor cost? (Illustrate using an ABC plan). b) Item 18 is critical to continued operations at GGIL. i. How would you recommend it be classified? ii. Give the reason(s) for your answer.arrow_forwardThomas 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 5,900 units per year. The cost of each unit is $103, and the inventory carrying cost is $8 per unit per year. The average ordering cost is $29 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 118 units. (This is a corporate operation, and there are 250 working days per year). a) What is the EOQ? units (round your response to two decimal places).arrow_forward
- William Beville’s computer training school, inRichmond, stocks workbooks with the following characteristics: Demand D = 19,500 units>yearOrdering cost S = +25>orderHolding cost H = +4>unit>yeara) Calculate the EOQ for the workbooks.b) What are the annual holding costs for the workbooks?c) What are the annual ordering costs?arrow_forwardThomas 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 5,750 units per year. The cost of each unit is $99, and the inventory carrying cost is $8 per unit per year. The average ordering cost is $31 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 115 units. (This is a corporate operation, and there are 250 working days per year). a) What is the EOQ? units (round your response to two decimal places). b) What is the average inventory if the EOQ is used? units (round your response to two decimal places). c) What is the optimal number of orders per year? orders (round your response to two decimal places). d) What is the optimal number of days in between any two orders? days (round your response to two decimal places). e) What is the annual cost of ordering and holding inventory? $ per year (round your response to two…arrow_forwardThomas 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 5,950 units per year. The cost of each unit is $99, and the inventory carrying cost is $8 per unit per year. The average ordering cost is $31 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 119 units. (This is a corporate operation, and there are 250 working days per year). a) What is the EOQ?units (round your response to two decimal places).arrow_forward
- 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…arrow_forwardHow do you do this? Please list step by step instructions.arrow_forwardDiscuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ) model. Why do conflicts arise between the EOQ model's optimal order quantity and the order quantity that managers regard as optimal?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
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
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY