Inventory Homework Problems

Evaluate the role their inventory plays in the company’s performance, operational efficiency, and customer satisfaction.

Using the spreadsheet, we found Q* = NORM.INV(.8,500,100) = 584.16. The simulation and newsvendor model give the same optimal stocking quantity.

10. If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

The timing of capacity changes also needs to be taken into consideration to achieve maximum efficenty given that demands of their products varies with seasonal changes. The ability to react to market demand changes quickly will determine manufacturers flexibility in keeping up with these demands. Manufacturers needs facilities to produce, whether warehouses to store its raw materials or finished goods, or manufacturing plants to produce their products. Services facilities are needed by certain manufacturing industries such as consumer electronics to cater for returns. Distribution centres also determine the efficenty of production distribution and un-nesessary inventory holding will result in higher holding cost. Such facilities require large investments and are integral of the manufacturer’s supply chain strategy and thus proper planning is needed when making these decisions regardong the size, location which affect the overall operations. How manufacturers run their productions also determine how successful will they be in terms of productivity and quality levels. Different types of equipment and processes also affect the cost and output of the manufacturing plant. Information systems that flow both upstream and downstream affects the forecasting, planning, inventory and production levels, they must be robust to ensure the manufacturing firm is able to react accordingly to changing demands and variations. In addition to their internal environment,

Question 4: Take into account the answer to question 1 and the supplier’s new policy outlined in question 2 and the warehouse’s new policy in question 3. Then determine Low’s new EOQ.

Sandra Enright of Techtronics Inc., an electronics supply firm, has been examining the times required for stock pickers to fill orders requested from inventory. She has determined that individual order-filling times approximately follow a normal distribution with a mean value of 3.2 minutes and standard deviation of 68 seconds.

Q9. Inventory carrying costs are based on the value of the product at the time it is held in inventory. When the product in sitting in the IDC Alliance Fort Worth Distribution Center, its value is a combination of purchase price plus any transportation costs to get it from the supplier to the DC plus in-transit carrying costs. On a per-unit bases (in dollars) what is the total inventory carrying cost for the safety stock and cycle stock inventory held at the Alliance Fort Worth Distribution Center if we purchase everything from Dong Hai Supply? From CousinsAg?

A. The simulated function given in the Excel spreadsheet “Hamptonshire Express: Problem_#1” allows the user to find the optimal quantity of newspapers to be stocked at the newly formed Hamptonshire Express Daily Newspaper. Anna Sheen estimated the daily demand of newspapers to be on a normal standard distribution; stating that daily demand will have a mean of 500 newspapers per day with a standard deviation of 100 newspapers per day. Using the function provided, the optimal stocking quantity, which maximizes expected profit, is determined to be approximately 584 newspapers. If 584 newspapers were to be ordered, Hamptonshire Express will net an

The cost of carrying inventories has been calculated using the current cost of bank loans (see Table 2). Do you think this is the appropriate rate? Explain, and in your answer consider both WACC and tax effects.

Davidson Hardware stocks an expensive composite-based plaster patching compound, currently classified “A” which is controlled by continuous review. Demand is variable, with an average of 6 pounds per week and a standard deviation of 2 pounds per week. Lead time is constant at one week. The firm’s current management of the product calls for a safety stock of one (1) pound.

We started the case analysis by the normality test for the current data to check if the data is normally distributed or not. Our objective is to calculate the current Total Cost and then come up with a better solution to lower the cost.

30. The manager of the local National Video Store sells videocassette recorders at discount prices. If the store does not have a video recorder in stock when a customer wants to buy one, it will lose the sale because the customer will purchase a recorder from one of the many local competitors. The problem is that the cost of renting warehouse space to keep enough recorders in inventory to meet all demand is excessively high. The manager has determined that if 90% of customer demand for recorders can be met, then the combined cost of lost sales and inventory will be minimized. The manager has estimated that monthly demand for recorders is normally distributed, with a mean of 180 recorders and a standard deviation of 60. Determine the number of recorders the manager should order each month to meet 90% of customer demand.

Going into 2004, Bob Moyer planned to produce 10,000 bicycles at Mile High Cycles. Construction of his bicycles includes the utilization of three departments, frames, wheel assembly, and final assembly. During this year, Mile High Cycles ended up actually producing 10,800 bicycles to meet higher than expected demand. Bob is curious as to whether or not he was successful in maintaining costs to meet these higher levels of demand.

3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?

The company is using a batch shop process flow structure. CBF, Inc. bases its board fabrication process on the average job size or on its typical order. This means that the company proceeds with the manufacturing process in batches so as to meet the specific requirements per order. The typical contract that the company currently gets is 60 boards per order. However, due to persisting factory defects, they manufacture a total of 75 boards per batch in order to compensate for 20% of the boards that they typically reject during the process.