OPERATIONS MANAGEMENT (LL)-W/ACCESS
17th Edition
ISBN: 9781260037821
Author: CACHON
Publisher: MCG
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Chapter 10, Problem 3PA
Summary Introduction
To determine: The annual inventory turns.
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2. It is an inventory strategy a company employs to increase efficiency and decrease waste by receiving and producing goods as they are needed in the production process, thereby reducing inventory costs.
a.Just In Time Inventory System
B.min-Max Inventory System
C.Pareto/80-20 inventory rule
D.ABC inventory system
E.None of the above
Thomas Kratzer is the purchasing manager for theheadquarters of a large insurance company chain with a centralinventory operation. Thomas’s fastest-moving inventory item hasa demand of 6,000 units per year. The cost of each unit is $100,
and the inventory carrying cost is $10 per unit per year. The aver-age ordering cost is $30 per order. It takes about 5 days for an
order to arrive, and the demand for 1 week is 120 units. (This is acorporate operation, and there are 250 working days per year.)a) What is the EOQ?b) What is the average inventory if the EOQ is used?c) What is the optimal number of orders per year?d) What is the optimal number of days in between any two orders?e) What is the annual cost of ordering and holding inventory?f ) What is the total annual inventory cost, including the cost ofthe 6,000 units?
Company XYZ makes bicycles. XYZ produces 400 bicycles a month. They must buy tires from a supplier at a cost of $20 per tire. The inventory holding cost rate is 15% and ordering costs $50 per order.
Part i) Let’s assume that there is no shortage inventory allowed.
Calculate optimal annual order quantity
Calculate annual total inventory cost ^already have the answer for this one. Just input the whole question so it would make more sense.
Part ii) Let’s assume that shortage inventory is allowed. With that being said, we know that the shortage cost per unit of item is $5 per year. <<this is the one that I am stuck on.
Calculate optimal annual order quantity
Calculate annual total inventory cost
Hint: Each bicycle has two tires.
Chapter 10 Solutions
OPERATIONS MANAGEMENT (LL)-W/ACCESS
Ch. 10 - It is costly to hold inventory, but inventory can...Ch. 10 - A delivery truck from a food wholesaler has just...Ch. 10 - Prob. 3CQCh. 10 - Prob. 4CQCh. 10 - Prob. 5CQCh. 10 - Prob. 6CQCh. 10 - Prob. 7CQCh. 10 - Prob. 8CQCh. 10 - Prob. 9CQCh. 10 - Prob. 10CQ
Ch. 10 - Prob. 11CQCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Prob. 3PACh. 10 - An electronics manufacturer has 25 days-of-supply...Ch. 10 - Prob. 5PACh. 10 - Prob. 6PACh. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - An online shoe retailers annual cost of holding...Ch. 10 - Prob. 10PACh. 10 - Prob. 11PACh. 10 - Prob. 12PACh. 10 - Prob. 13PACh. 10 - Prob. 14PACh. 10 - Prob. 15PACh. 10 - Prob. 16PACh. 10 - A retailer has annual sales of 500,000 and an...Ch. 10 - Prob. 18PACh. 10 - Prob. 19PACh. 10 - Prob. 1CCh. 10 - Prob. 3CCh. 10 - Prob. 4C
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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
- The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardStaples buys printer cartridges for $20. The demand for the cartridges is 300 per month. Staples incurs a fixed cost for managing the cartridges of $100. Their annual holding cost is 20%. Calculate Inventory turns per year Number of orders Staples makes per year.arrow_forwardMost inventory models attempt to minimize a. The likelihood of stockout b. None of these c. The numbers of orders placed d. Total inventory-based cost e The number of items orderedarrow_forward
- Annual demand 2,400 units Unit price (`) 2.40 Ordering cost (`) 4.00 Storage cost 2% p.a. Interest rate 10% p.a. Lead time ½ month Calculate EOQ, reorder level and total annual inventory cost. How much does the total inventory cost vary if the unit price is changed to $ 5? Typed and correct answer please. I ll rate accordingly.arrow_forwardLower days of supply means, ____ inventory. Lower turns means ____inventory. A) More , less B) less, more C) more, more D) less, lessarrow_forward24 . Which model of the following has been used to calculate the Inventory cost: Average inventory * hours* Inventory Cost (Start inventory + End inventory) * hours* Inventory Cost Average (Start inventory + end inventory) * inventory cost None of the abovearrow_forward
- Thomas Kratzer is the purchasing manager forthe headquarters of a large insurance company chain witha central inventory operation. Thomas’s fastest-movinginventory item has a demand of 6,000 units per year. The costof each unit is $100, and the inventory carrying cost is $10 perunit per year. The average ordering cost is $30 per order. Ittakes about 5 days for an order to arrive, and the demand for1 week is 120 units. (This is a corporate operation, and thereare 250 working days per year.)a) What is the EOQ?b) What is the average inventory if the EOQ is used?c) What is the optimal number of orders per year?d) What is the optimal number of days in between any twoorders?e) What is the annual cost of ordering and holding inventory?f) What is the total annual inventory cost, including the costof the 6,000 units?arrow_forwardLead time for one of your fastest-moving products is 20 days. Demand during this period averages 110 units per day. Part 2 a) What would be an appropriate reorder point? _______ units (enter your response as a whole number). b) How does your answer change if demand during lead time doubles? c) How does your answer change if demand during lead time drops in half?arrow_forwardInstruction: Answer what is being required. You may compute them manually or use the Excel QM.Pencil number 2 at the campus book-store are sold at a fairly steady rate of $60 per week. It cost the bookstore $12 to initiate an order to its supplier and holding costs are $0.005 per pencil per year.Determine◦ How much is the Annual holding cost?◦ How much is the Annual ordering cost? ◦ What is the total annual inventory cost?If the order lead time is 4 months, determine the reorder point.Please Illustrate the inventory profile graphically.What additional cost would the book-store incur if it orders in batches of 1000?arrow_forward
- Items purchased from a vendor cost $250 each, and the forecast for next year’s demand is 2,000 units. The optimal order size is 100. The firm operates 52 weeks next year and lead time is 3 weeks. It costs $5 every time an order is placed for more units, and the storage cost is $2 per unit per year. What is the total ordering cost for a year? a.100 b.50 c.250 d.500 e.300arrow_forwardIt costs you $500 every time you place an order for a particular product. It costs you $3 per unit to keep this product in stock. Annual sales are 1,552. Calculate the Economic Order Quantity to the nearest integer.arrow_forwardasap!! A manager of an inventory system believes that inventory models are important decision making aids. Even though often using an EOQ policy, the manager never considered a backorder model because of the assumption that backorders were “bad” and should be avoided. However, with upper management’s continued pressure for cost reduction, you have been asked to analyze the economics of a backorder policy for some products that can possibly be backordered. For a specific product with D = 1200 units per year, Co = 160, = 4, and = 25, what is the difference in total annual cost between the EOQ model and the planned shortage or backorder model? If the manager adds constraints that no more than 25% of the units can be backordered and that no customer will have to wait more than 18 days for an order, should the backorder inventory policy be adopted? Assume 300 working days per year.arrow_forward
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