Operations Management
2nd Edition
ISBN: 9781260484687
Author: CACHON, Gerard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 7CQ
Summary Introduction
To determine: The correct option.
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What policy results in stockouts 10% of the time?
Calculate total annual cost for the alternative suppliers for aproduct with following characteristics: montly demand; mean: 5000, standard deviation 2000 Holding cost: 30% Cycle service level: 98%
Using EOQ formula, find the lot size. Don’t forget to add ordering cost to the total cost!
Supplier 1
Supplier 2
Supplier 3
Ordering Cost(per order )
1000
2000
5000
Cost
10
9
8
Average Lead Time ( month )
0.5
2
2
Lead time std deviation ( month )
0.5
1
2
Suzuki is a company that manufactures motorcycles. It produces 450 motorcycles a month. It buys tyres for motorcycles from Dunlop at a cost of $20 per tyre. The company’s inventory carrying cost per tyre is estimated to be 15% of the cost per tyre. The cost per order is calculated at 250% of the cost per tyre.
Rquirement:
i) Calculate the EOQ. ii) Determine the number of orders per year? iii) Compute the total cost.
Chapter 10 Solutions
Operations Management
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. 12CQCh. 10 - Prob. 13CQCh. 10 - Prob. 14CQCh. 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 - Prob. 9PACh. 10 - Prob. 10PACh. 10 - Prob. 11PACh. 10 - Prob. 12PACh. 10 - A retailer has annual sales of 500,000 and an...Ch. 10 - An online shoe retailers annual cost of holding...Ch. 10 - Prob. 15PACh. 10 - Prob. 16PACh. 10 - Prob. 17PACh. 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
- Describe the 3 differences between a fixed-quantity (Q) and a fixed-period (P) inventory ns4 a. system? Fixed Quality Inventory Fixed Period Inventoryarrow_forward21- Which one of the following represent FIFO method of inventory evaluation? a. Old items remain in inventory b. Old merchandise is sold first c. New merchandise is sold first d. Average number of goods are soldarrow_forwardECUR UMIC ORDER QUANTITY CALCULATIONS (2 QUESTIONS) Company uses 800 units of a product per year on a continuous basis. The product year and order costs of $300 per order. It takes 30 days to receive a shipment after an order is placed and the a safety stock of 5 days usage in inventory. has carrying costs of $50 A. Calculate the economic order quantity a. 98 B. Determine the reorder a. 150 days (3 CASH DISCOUNTS point. ONS) (Assume (EOQ). a 360-day year.) per unit per firm requiresarrow_forward
- Stationery Supplies orders plastic erasers from a company in Nürnberg, Germany.It takes six weeks to ship the erasers from Germany to Utah. Stationery Suppliesmaintains a standing order of 200 erasers every six months (shipped on the first ofJanuary and the first of July).a. Assuming the ordering policy the store is using does not result in large buildupsof inventory or long-term stock-outs, what is the annual demand for erasers?b. Draw a graph of the pipeline inventory (that is, the inventory ordered but notreceived) of the erasers during one year. What is the average pipeline inventoryof erasers during the year?arrow_forwardGiven this information:Lead-time demand 600 poundsStandard deviation of lead time demand 52 pounds (Assume normality.)Acceptable stockout risk during lead time 4 percenta. What amount of safety stock is appropriate?b. When should this item be reordered?c. What risk of stockout would result from a decision not to have any safety stock?arrow_forwardDescribe the difference between a fixed-quantity (Q) anda fixed-period (P) inventory system.arrow_forward
- Al Fursan Inc. needs 300 kgs of a material per month (four weeks). It costs RO 10 to make and receive an order, and it takes 16 workdays to receive it. The annual holding cost is 15 % of purchase price. The price RO1 per kg. The company is operating 6 days per week. What is the expected time (in days) between order? Round-up to the nearest integer Select one: a. 55 b. 53 c. 207 d. 105 e. 58arrow_forwardWhat is the purpose of inventory control?arrow_forwardPlease show work so I can understand it. Given this information: •Expected demand during lead time = 800 units • Standard deviation of lead time demand = 40 units Assuming that lead time demand is distributed normally. The risk of stockout is 5 percent during lead time (a) What amount of safety stock is appropriate? (b) Calculate ROParrow_forward
- 03) Halifax Souvenir Company currently orders 500 units four times each year. Each order costs $12 and each unit costs $1.20 per year to carry. On average, it takes 5 days to receive an order from the supplier. The company operates 250 days per year. Required: 1. What is the EOQ? 2. Calculate total annual inventory cost under EOQ. 3. What is the current inventory cost? 4. What is the re-order point?arrow_forwardA material manager adopts the policy to place an order for a minimum quantity of 500 of a particular item in order to avail a discount of 10 percent. It was found from the company records that for last year 8 orders were placed each of size 200 Nos, ordering cost is ksh 500 per order. Inventory carrying charges at 40 per cent cost unit is ksh 400. (a) Show whether the purchase manager is justified in his decision (b) What is the effect of this decision on the companyarrow_forwardEOQ for Production Lots ExerciseA Power Company buys coal from a Coal mine togenerate electricity in rural areas. The Coal minecan supply coal at the rate of 3,500 tons per day for$10.50 per ton. The Power Company uses the coalat a rate of 800 tons per day and operates 365 daysper year. The annual carrying cost for coal is 20%of the acquisition cost, and the ordering cost is$5,000.a) What is the economical production lot size?b) What is the Power Company’s maximuminventory level for coal?arrow_forward
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