Practical Operations Management
2nd Edition
ISBN: 9781939297136
Author: Simpson
Publisher: HERCHER PUBLISHING,INCORPORATED
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Question
Chapter 10, Problem 22P
Summary Introduction
Interpretation:
Minimum annual amount to be paid by gift shop.
Concept Introduction: Inventory management is the process of managing the company’s stock so that there are no stock-outs. It includes ordering, storing, managing the stock.
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The average expense of keeping inventory for an integrated circuit producer is 48 percent.What inventory keeping expense (in $) does an object cost $300 and has an estimated one-month inventory supply?
A gift shop sells 400 boxes of scented candles a year. The ordering cost is $50 for scented candles, and holding cost is $25 per box per year. What is the economic order size for scented candles?
A natural food store carries a brand of coffee called World’s Greatest Coffee. The following data should be used in your calculations.
Demand/Sales = 10 cases of coffee per week (you will need to convert this to an annual amount)
Ordering Cost = $12 per order
Carrying Charge = 18% per year
Unit Cost = $75 per case
1. What is the annual cost or ordering the coffee? What is the annual cost of carrying the coffee? And what is the total cost (ordering and carrying costs added together)?2. Name three reasons or factors that might cause the firm to order a larger or smaller amount than the EOQ.
Chapter 10 Solutions
Practical Operations Management
Ch. 10 - Prob. 1DQCh. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4P
Ch. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Prob. 17PCh. 10 - Prob. 18PCh. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - Prob. 23PCh. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Prob. 29PCh. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Prob. 2.1QCh. 10 - Prob. 2.2QCh. 10 - Prob. 2.3QCh. 10 - Prob. 2.4QCh. 10 - Prob. 3.1QCh. 10 - Prob. 3.2QCh. 10 - Prob. 3.3QCh. 10 - Prob. 3.4Q
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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
- Sam's Cat Hotel operates 50 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $12.00 per bag. The following information is available about these bags: > Demand = 95 bags/week > Order cost = $50.00/order > Annual holding cost = 20 percent of cost > Desired cycle-service level = 80 percent > Lead time =5 weeks (30 working days) > Standard deviation of weekly demand = 15 bags > Current on-hand inventory is 320 bags, with no open orders or backorders. a. Suppose that the weekly demand forecast of 95 bags is incorrect and actual demand averages only 75 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be $ higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)arrow_forwardFisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 97,200 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. What is the economic ordering quantity? How many orders will be placed during the year? What will the average inventory be? What is the total cost of ordering and carrying inventory?arrow_forwardAn insurance company has custom envelopes printed for correspondence with its clients. It uses 780 boxes of envelopes annually at a steady rate. It costs $285 for delivery and processing (in addition to the printing costs) each time the company places an order, and it costs $2 per box for annual storage. To minimize costs, how many boxes of envelopes should the company order?arrow_forward
- Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. In the second year, Fisk Corporation finds that it can reduce ordering costs to $1 per order, but carrying costs will stay the same at $1.50 per unit. a-1. What is the economic ordering quantity for the second year? Economic ordering quantity (EOQ) a-2. How many orders will be placed during the second year? Number of orders a-3. What will the average inventory be for the second year? Average inventory Total costs units units a-4. What is the total cost of ordering and carrying inventory for second year? LAarrow_forwardPaul’s Toy Distributor (PTD) sells 200 game consoles every week. PTD charges a $300 fixed cost for every delivery. PTD’s annual inventory holding cost is $45 per console. Assume that there are 52 weeks a year. Assume that PTD orders 1000 game consoles at a time. What is the average amount of time the consoles stay as PTD’s inventory before being sold? Find the closest answer.arrow_forwardThe manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $0.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer.At what point should he reorder Stein beer?arrow_forward
- Charlie’s Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops every four weeks to take orders. Because the orders are shipped directly from Italy, they take three weeks to arrive. Charlie’s Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 30 pounds. Charlie’s prides itself on offering only the best quality ingredientsand a high level of service, so it wants to ensure a 98 percent probability of not stocking out on pepperoni. Assume that the sales representative just walked in the door and there are currently 500 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order? (Answer in Appendix D)arrow_forward6000 units of a part are needed every year. Currently, this part is manufactured internally. Each production run costs 500 dollars to set up. The part costs 5 dollars. The carrying cost is 10% per year. The company has the option of ordering this part from another company. This would increase the part’s cost to 6 dollars, although the fixed cost of ordering would be low at 300 dollars per order. Should the company continue manufacturing the part, or order it? Show your calculations.arrow_forwardAn integrated circuit manufacturer’s annual cost of holding inventory is 48 percent.What inventory holding cost (in $) does it incur for an item that costs $300 and has aone-month supply of inventory on average?arrow_forward
- A subcontracting firm Gamma Pharmaceuticals Ltd. located in Western India dealing with generic medicines operates 50 weeks per year. The following information is available regarding the major ingredient used for the medicine:Weekly Demand= 60 unitsStandard deviation of weekly demand = 9 unitsOrdering costs (Co) = Rs. 64/ orderHolding costs (Ch) = Rs.40/unit/yearCycle-service level = 90% (z-value = 1.28)Lead time = 2 weeksNumber of weeks per year = 50 weeksd) Using the fixed order quantity system to control inventory, calculate the EOQe) Compute the reorder point and state the order decision rulef) Compute the total variable cost of inventory.arrow_forwardA service garage uses 204 boxes of cleaning clothes a year. The boxes cost $12 each. The cost to place one order is $15, and the cost to hold one box in inventory for a year is $2.40. Using this information, what is our total holding and ordering cost if we currently order 12 boxes at a time?arrow_forwardYour company is streamlining its inventory management systems and has evaluated its inventory purchasing using the Economic Order Quantity (EOQ) model. 75,000 units are used annually. Each unit costs $50. The order cost (per order) is $180 and the carrying cost per item per year is $40. On the basis of this information it is recommended that the EOQ is 822 units per order. Unfortunately the supplier of inventory has a minimum order quantity of 2,000 units. How much more will it cost your company each year in total because of this supplier requirement? Show your workings.arrow_forward
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Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY