Practical Operations Management
2nd Edition
ISBN: 9781939297136
Author: Simpson
Publisher: HERCHER PUBLISHING,INCORPORATED
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Chapter 10, Problem 6P
Summary Introduction
Interpretation: Impact on reorder point when policy’s order size in increased is to be ascertained.
Concept Introduction: Reorder point is the minimum level of inventory or stock which indicates a firm to restock its inventory. It is an indicator for a firm to restore its stock.
Stock out risk is the risk of having no item in the inventory when demand increases.
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Students have asked these similar questions
The company uses 150,000 gallons of alcohol per month. The cost of carrying the alcohol in inventory is P0.50 per gallon per year, and the cost of ordering is P150 per order. The firm uses the alcohol at a constant rate throughout the year. It takes 18 days to receive an order once it is placed. The reorder point is?
The Big Buy Supermarket stocks Munchies Cereal. Demand for Munchies is 4,000 boxes peryear (365 days). It costs the store $60 per order of Munchies, and it costs $0.80 per box per yearto keep the cereal in stock. Once an order for Munchies is placed, it takes 4 days to receive theorder from a food distributor. Determine The reorder point
Meena Distributors has an annual demand for an airport metal detector of
1,420
units. The cost of a typical detector to Meena is
$400.
Carrying cost is estimated to be
19%
of the unit cost, and the ordering cost is
$25
per order. If Purushottama
Meena,
the owner, orders in quantities of
300
or more, he can get a
4%
discount on the cost of the detectors. Should Meena take the quantity discount?
Part 2
What is the EOQ without the discount?
EOQ =
enter your response here
units (round your response to one decimal place).
Part 3
Since the total cost with the discount is
▼
greater than
less than
the total cost without the discount, Meena
▼
should
should not
order 300 units at a time in order to qualify for the discount.
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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- A company is targeting a cycle service level of 25%. What should their reorder point be if they have an average weekly demand of 100, a weekly demand standard deviation of 20, and a lead time of 5 weeks?arrow_forwardWang Distributors has an annual demand for an air-port metal detector of 1,400 units. The cost of a typical detector to Wang is $400. Carrying cost is estimated to be 20% of the unit cost,and the ordering cost is $25 per order. If Ping Wang, the owner,orders in quantities of 300 or more, he can get a 5% discount on thecost of the detectors. Should Wang take the quantity discount?arrow_forwardCoffee Company uses 800 units of a product per year on a continuous basis. The product has a Fixed Cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days’ usage in inventory as a safety stock. Show Computations and Explanations. The EOQ = 200 Units The Average Level of Inventory = 92 Units The Reorder Point = 33 Units A. Indicate if the Variable Change if the firm does not hold the Safety Stock. Variable: Ordering Cost (Format: Change or Do not Change) B. Indicate if the Variable Change if the firm does not hold the Safety Stock. Variable: Carrying Cost (Format: Change or Do not Change) C. Indicate if the Variable Change if the firm does not hold the Safety Stock. Variable: Total Inventory Cost (Format: Change or Do not Change)arrow_forward
- PM CTC is engaged in selling shoes for the military. Upon checking on PM CTC’s supplier, it takes 8 days in between placing an order and eventually receiving it. On the average, they sell 2000 pairs of shoes per day. Determine PM CTC’s reorder point.arrow_forwardPeach Company uses 800 units of a product per year on a continuous basis. The product has a Fixed Cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days’ usage in inventory as a safety stock. Show Computations and Explanations. The EOQ = 200 Units The Average Level of Inventory = 121.92 Units The Reorder Point = 33 Units A. Indicate if the Variable Change if the firm does not hold the Safety Stock. Variable: Reorder Point (Format: Change or Do not Change) B. Indicate if the Variable Change if the firm does not hold the Safety Stock. Variable: Economic Order Quantity (Format: Change or Do not Change)arrow_forwardDelaney Co. uses 12,000 of an item per year. They are open 300 days per year. The item takes 8 days from the time they place an order until they receive it. They like to maintain a safety stock of 200. What is Delaney's reorder point for this item?arrow_forward
- Dunstreet’s Department Store would like to develop an inventory ordering policy with a 95 percent probability of not sticking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets. The demand for white percale sheets is 5,000 per year. The store is open 365 days per year. Every two weeks (14 days) inventory is counted and a new order is placed. It takes 10 days for the sheets to be delivered. The standard deviation of demand for the sheets is 5 per day. There are currently 150 sheets on-hand.How many sheets should you order?arrow_forwardAn increase in Economic Order Quantity will lead to Increase in Ordering cost Reduction in inventory carrying cost Reduction in ordering cost and increase in inventory carrying cost Increase in ordering cost and reduction in inventory carrying costarrow_forwardDunstreet's Department Store would like to develop an inventory ordering policy with a 95 percent probability of not stocking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets. Demand for white percale sheets is 5,000 per year. The store is open 365 days per year. Every two weeks (14 days) inventory is counted and a new order is placed. It takes 10 days for the sheets to be delivered. Standard deviation of demand for the sheets is five per day. There are currently 150 sheets on-hand. How many sheets should you order? Note: Use Excel's NORM.S.INV() function to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number.arrow_forward
- Lead time for some SKU is always 10 days, and demand for that SKU is always 50 per day. What isthe reorder point for this SKU?arrow_forwardThe concession stand at the Blacksburg High School stadium sells slices of pizza during soccergames. Concession stand sales are a primary source of revenue for high school athletic programs,so the athletic director wants to sell as much food as possible. However, any pizza notsold is given away to the players, coaches, and referees, or it is thrown away. The athletic directorwants to determine a reorder point that will meet, not exceed, the demand for pizza. Pizzasales are normally distributed, with a mean of 6 pizzas per hour and a standard deviation of2.5 pizzas. The pizzas are ordered from Pizza Town restaurant, and the mean delivery time is30 minutes, with a standard deviation of 8 minutes. Currently, the concession stand places an order when it has 1 pizza left. What level of service does this result in?arrow_forwardExplain the relationship between the annual ordering cost and the ordering size. Why is there a need to compute for the Economic order quantity?arrow_forward
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