6-23 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time, the demand per week for West valves is approximately 80. a. What is the EOQ? b. What is the ROP? c. Is the ROP greater than the EOQ? If so, how is this situation handled? d. What is the average inventory? What is the annual holding cost? e. How many orders per year would be placed? What is the annual ordering cost?

6-23 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time, the demand per week for West valves is approximately 80. a. What is the EOQ? b. What is the ROP? c. Is the ROP greater than the EOQ? If so, how is this situation handled? d. What is the average inventory? What is the annual holding cost? e. How many orders per year would be placed? What is the annual ordering cost?

Name: 6-23 Barbara Bright is the purchasing agent for West Valve Company. We
Uploaded: 2024-03-20T06:57:05.000Z
Channel: Bartleby
Description: 6-23 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90,

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...

See similar textbooks

Similar questions

Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
6-23 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time, the demand per week for West valves is approximately 80. d. What is the average inventory? What is the annual holding cost? e. How many orders per year would be placed? What is the annual ordering cost?
Lia ITZY has determined that the annual demand for number 6 screws is 100,000 screws. Lia, who works in her brother’s hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one screw in inventory for a year is one-half of 1 cent. Assume that the demand is constant throughout the year. QUESTION: How many number 6 screws should Lia order at a time if she wishes to minimize total inventory cost?
Lia ITZY has determined that the annual demand for number 6 screws is 100,000 screws. Lia, who works in her brother’s hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one screw in inventory for a year is one-half of 1 cent. Assume that the demand is constant throughout the year. QUESTION: How many orders per year would be placed? What would the annual ordering cost be?
ANT Infra orders two kinds of precast items: A and B for use in its projects from two different suppliers. The precasts are needed throughout the entire 52-week year. Precast A are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. While, precast B is ordered from a supplier who delivers by every three weeks. Data for both precast items are as follows:Item Precast A Precast BAnnual demand 10,000 5,000Holding cost (% of item cost)20% 20%Order cost $150 $25Lead time 4 weeks 1 weekSafety stock 55 units 5 unitsItem cost $10.00 $2.00 a. Employ Q system for precast A and calculate the EOQ, the reorder point, total inventory cost? b. Employ P system for precast B and estimate the target level inventory and total inventory cost?
The amount of denim used daily by the Southwest ApparelCompany in its manufacturing process to make jeans isnormally distributed with an average of 4000 yards ofdenim and a standard deviation of 600 yards. The lead timerequired to receive an order of denim from the textile mill is a constant 7 days. Determine the safety stock and re-order point if the company wants to limit the probability of a stockout and work stoppage to 5%.
COMPUTING REORDER POINTS (ROP) FOR IPHONES WITH AND WITHOUT SAFETY STOCKAn Apple store has a demand (D) for 8,000 iPhones per year. The firm operates a 250-day working year.On average, delivery of an order takes 3 working days, but has been known to take as long as 4 days. Thestore wants to calculate the reorder point without a safety stock and then with a one-day safety stock.APPROACH c First compute the daily demand and then apply Equation (12-6) for the ROP.Then compute the ROP with safety stock.
The Western Jeans Company purchases denim from Cumberland Textile Mills. The Western Jeans Company uses 35,000 yards of denim per year to make jeans. The cost of ordering denim from the textile company is $500 per order. It costs Western $0.35 per yard annually to hold a yard of denim in inventory. Determine the optimal number of yards of denim the Western Jeans Company should order, the minimum total annual inventory cost, the optimal number of orders per year, and the optimal time between orders.
Happy Pet, Inc., is a large pet store located in LongBeach Mall. Although the store specializes in dogs, it a lso sellsfish, turtle, and bird supplies. The Everlast Leader, a leather leadfor dogs, costs Happy Pet $7 each. There is an annual demand for6,000 Everlast Leaders. The manager, Stephan Wagner, has determinedthat the ordering cost is $20 per order and the carrying cost,as a percentage of unit cost, is 15%. Happy Pet is now consideringa new supplier of Everlast Leaders. Each lead would cost only$6.65, but, in order to get this discount, Happy Pet would have tobuy shipments of 3,000 at a time. Should Happy Pet use the newsupplier and take this discount for quantity buying?
Chris usually sells 120 copies of newspaper each day and believe that sale are normally distributed, with a standard deviation of 15 papers. He pays 70 cents for each paper, which sells $1.25. For each unsold paper, he receives 30-cent credit. a) determine how many papers he should order each day b) calculate the stockout risk for that quantity.
An online footwear firm Shoe-n-co has four regional warehouses. Demand at each warehouse is normally distributed with a mean of 10,000 per week and a standard deviation of 2,000. Annual holding cost is 25%, and each unit of Prancs rubber shoes costs the company $10. Each order incurs an ordering cost of $1,000 (primarily from fixed transportation cost), and lead time is 1 week. The company wants the probability of stocking out to be no more than 5%. Assume 50 working weeks per year. What is the average inventory held at each warehouse? What is the annual inventory cost (holding + ordering) for Shoe-n-co? On average, how long does a unit of product spend in the warehouse before being sold? .. Little's law, maybe?
An online footwear firm Shoe-n-co has four regional warehouses. Demand at each warehouse is normally distributed with a mean of 10,000 per week and a standard deviation of 2,000. Annual holding cost is 25%, and each unit of Prancs rubber shoes costs the company $10. Each order incurs an ordering cost of $1,000 (primarily from fixed transportation cost), and lead time is 1 week. The company wants the probability of stocking out to be no more than 5%. Assume 50 working weeks per year. Suppose that Shoe-n-co follows a periodic review policy with a review period of 2 weeks. Recall that the firm has four regional warehouses with demand at each warehouse that is normally distributed with a mean of 10,000 per week and a standard deviation of 2,000. Further, annual holding cost is 25%, and each unit of Prancs rubber shoes costs the company $10. Replenishment lead time is 1 week. The company wants a service level of 95%. Assume 50 working weeks per year. What is the annual…