Operations and Supply Chain Management 9th edition
9th Edition
ISBN: 9781119320975
Author: Roberta S. Russell, Bernard W. Taylor III
Publisher: WILEY
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Textbook Question
Chapter 13, Problem 1.1CP
The Instant Paper Clip Office Supply Company
Christie Levine is the manager of the Instant Paper Clip Office Supply Company in Louisville. The company attempts to gain an advantage over Christie maintains these inventory levels by borrowing cash on a daily basis front the First American Bank. She estimates that for the coming fiscal year the company’s demand for cash to pay for inventory will be $17,000 per day for 305 working days. Any money she borrows during the year must be repaid with interest by the end of the year. The annual interest rate currently charged by the bank is 9%. Any time Christie takes out a loan to purchase inventory, the bank charges the company a loan origination fee of $1200 plus 2¼ points (2.25% of the amount borrowed).
Christie often uses EOQ analysis to determine optimal amounts of inventory to order for different office supplies. Now she is wondering if she can use the same type of analysis to determine an optimal borrowing policy. Determine the amount of the loan Christie should borrow from the bank, the total annual cost of the company’s borrowing policy, and the number of loans the company should obtain during the year. Also determine the level of cash on hand at which the company should apply for a new loan given that it takes 15 days for a loan to be processed by the bank.
Suppose the bank offers Christie a discount as follows. On any loan amount equal to or greater than $500,000, the bank will lower the number of points charged on the loan origination fee from 2.25% to 2.00%. What would be the company’s optimal amount borrowed?
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The Rainwater Brewery produces Rainwater Light Beer, which it stores in barrels in its warehouse and supplies to its distributors on demand. The demand for Rainwater is 1,500 barrels of beer per day (365 days per year). The brewery can produce 2,000 barrels of Rainwater per day. It costs $6,500 to set up a production run for Rainwater. Once it is brewed, the beer is stored in a refrigerated warehouse at an annual cost of $50 per barrel. Determine the economic order quantity and the minimum total annual inventory cost.
Perpetual Inventory Using LIFO
Beginning inventory, purchases, and sales data for DVD players are as follows:
November 1 Inventory
79 units at $63
10
Sale
63 units
15
Purchase
102 units at $67
20
Sale
57 units
24
Sale
14 units
30
Purchase
21 units at $70
The business maintains a perpetual inventory system, costing by the last-in, first-out method.
Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.
Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Goods Sold Unit Cost column and LOWER
unit cost first in the Inventory Unit Cost column.
Schedule of Cost of Goods Sold
LIFO Method
DVD Players
Quantity
Date
Purchased
Purchases
Unit Cost
Purchases
Total Cost
Quantity
Sold
Cost of Goods
Cost of Goods
Sold Unit Cost
Sold Total Cost
Inventory
Quantity
Inventory
Unit Cost
Inventory
Total Cost
Nov.
1
Nov.
10
Nov.
000…
1. Padilla Electronics stocks and sells a particular brand of microcomputer. It costs the firm $450 each time it places an order with the manufacturer for the microcomputers. The cost of carrying one microcomputer in inventory for a year is $170. The store manager estimates that total annual demand for the computers will be 1,200 units, with a constant demand rate throughout the year. Orders are received within the minutes after placement from a local warehouse maintained by the manufacturer. The store policy is never to have stock outs of the microcomputers. The store is open for business everyday of the rear except Christmas day.
In reference to problem no. 1, determine the number of orders per year
Chapter 13 Solutions
Operations and Supply Chain Management 9th edition
Ch. 13.S - Prob. 1QCh. 13.S - How are steady-state results achieved in a...Ch. 13.S - Prob. 3QCh. 13 - Describe the difference between independent and...Ch. 13 - Distinguish between a fixed-order-quantity system...Ch. 13 - Discuss customer service level for an inventory...Ch. 13 - Explain the ABC inventory classification system...Ch. 13 - Identify the two basic decisions addressed by...Ch. 13 - Describe the major cost categories used in...Ch. 13 - Explain how the order quantity is determined using...
Ch. 13 - What are the assumptions of the basic EOQ model,...Ch. 13 - How are the reorder point and lead lime related in...Ch. 13 - Describe how the production quantity model differs...Ch. 13 - How must the application of the basic EOQ model be...Ch. 13 - Why do the basic EOQ model variations not include...Ch. 13 - In the production quantity EOQ model, what would...Ch. 13 - Explain in general terms how a safety stock level...Ch. 13 - Explain the difference between a single-stage...Ch. 13 - AV City stocks and sells a particular brand of...Ch. 13 - AV City (Problem 13.1) assumed with certainty that...Ch. 13 - A firm is faced with the attractive situation in...Ch. 13 - The Sofaworld Company purchases upholstery...Ch. 13 - The Wallace Stationery Company purchases paper...Ch. 13 - The Ambrosia Bakery makes calms for freezing and...Ch. 13 - The EastCoasters Bicycle Shop operates 364 days a...Ch. 13 - The Chemeo Company uses a highly toxic chemical in...Ch. 13 - The Food Place Supermarket stocks Munehkin...Ch. 13 - Kroft Foods makes cheese to supply to stores in...Ch. 13 - The Shotz Brewery produces an ale that it stores...Ch. 13 - Tradewinds Imports is an importer of ceramics from...Ch. 13 - JAL Trading is a Hong Kong manufacturer of...Ch. 13 - In Problem 12.1 in Chapter 12, the Hartley-Davis...Ch. 13 - In Problem 12-2 in Chapter 12, Carpel City orders...Ch. 13 - In Problem 12.47 in Chapter 12, Delaplane...Ch. 13 - The Paramount Paper company produces paper from...Ch. 13 - Kellys Tavern serves Shamrock draft beer to its...Ch. 13 - The daily demand for Ironcoat paint at the Top...Ch. 13 - IM Systems assembles microcomputers from genetic...Ch. 13 - IM Systems assembles microcomputers from generic...Ch. 13 - KVS Pharmacy fills prescriptions fen a popular...Ch. 13 - Food Place Market stocks frozen pizzas in a...Ch. 13 - The Mediterranean Restaurant stocks a red Chilean...Ch. 13 - The Aztec Company stock a variety of parts and...Ch. 13 - The EastCoasters Bicycle Shop stocks bikes;...Ch. 13 - Tara McCoy is the office administrator for the...Ch. 13 - The concession stand at the Shelby High School...Ch. 13 - The Instant Paper Clip Office Supply Company...Ch. 13 - The Texas Gladiators Apparel Store The Texas...Ch. 13 - Pharr Foods Company Pharr Foods Company produces a...
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- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardThe chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forward1. Padilla Electronics stocks and sells a particular brand of microcomputer. It costs the firm $450 each time it places an order with the manufacturer for the microcomputers. The cost of carrying one microcomputer in inventory for a year is $170. The store manager estimates that total annual demand for the computers will be 1,200 units, with a constant demand rate throughout the year. Orders are received within the minutes after placement from a local warehouse maintained by the manufacturer. The store policy is never to have stock outs of the microcomputers. The store is open for business everyday of the rear except Christmas day. Determine the optimal order quantity per order.arrow_forward
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