EBK PRODUCTION AND OPERATIONS ANALYSIS
EBK PRODUCTION AND OPERATIONS ANALYSIS
7th Edition
ISBN: 9781478628385
Author: Olsen
Publisher: WAVELAND PRESS (ECONTENT)
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Chapter 8.1, Problem 1P
Summary Introduction

Interpretation:Differentiate between ‘independent’ and ‘dependent’ in reference to the inventory control models and MRP (material resource planning).

Concept Introduction:Inventory management relates to two broad types of items-the demand dependent items and independent items. As the terms indicate, the former items are dependent on the demand of some other item while the independent items are not related to or dependent on the demand for any other item.

Both the types of items are dealt with by different models. MRP, works for demand related items primarily those linked to the finished product/s to be manufactured. Demand may be known or uncertain. Other inventory models are applicable to items independent of demand.

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The annual demand for water bottles at Mega Stores is 500 units, with an ordering cost of Rs. 200 per order. If the annual inventory holding cost is estimated to be 20%. of unit cost, how frequently should he replenish his stocks? Further, suppose the supplier offers him a discount on bulk ordering as given below. Can the manager reduce his costs by taking advantage of either of these discounts? Recommend the best ordering policy for the store. Order size Unit cost (Rs.) 1 – 49 pcs. 20.00 50 – 149 pcs. 19.50 150 – 299 pcs. 19.00 300 pcs. or more 18.00
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