EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 11, Problem 1.3DQ
Summary Introduction
Interpretation:
The total order and inventory- holding cost for a fixed- quantity system and differentiate it with the exiting Q’s and whether it will be applicable to save money using the fixed-quantity system (FQS).
Concept Introduction:
Economic order quantity refers to the number of units that an organization should add to its inventory with all orders in order to decrease the holding, order cost, and shortage cost. It reflects the balance between ordering and holding costs.
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Develop a EOQ solution and calculate total relevant costs for the gross requirements in the following table*.
Period
1
2
3
4
5
6
7
8
9
10
11
12
Gross requirements
20
40
30
20
20
10
40
50
*Holding
cost=$1.50/unit/week;
setup
cost=$150;
lead
time=1
week; beginning
inventory=40.
What is the average demand per week?
(enter
your responses with 2 decimal
places):
enter your response here
Calculate Economic Order Quantity (EOQ)
(enter
your responses as whole
numbers):
enter your response here
Calculate the number of periods for POQ
(enter
your responses as whole
numbers):
enter your response here
Develop a POQ solution
(enter
your responses as whole
numbers).
Period
1
2
3
4
5
6
7
8
9
10
11
12
Gross requirements
20…
Compare and contrast the fixed quantity version of EOQ with the fixed interval version. In which situations would each be used?
Explain the economic order quantity (EOQ) and its impact on cost of operations.
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- If your average daily demand is 60 units, and the replenishment cycle (lead time) is 5 days; with 60 units of safety sock, what is the re-order point?arrow_forwardAhmet Uslu experiences an annual demand of 220 000 MU for pro quality tennisballs at the İzmir Tennis Supply Company. It cost Ahmet 30 MU to place an order andhis carrying cost is 18%. How many orders per year should Ahmet place for the balls? Please mention formulas and do it in detail so I can understand.arrow_forwardThe following inventory date have been established for Warriors Company: Order must be placed in multiples of 100 Annual sales are 338,000 units The purchase price per unit is P6 Carrying cost is 20% of the purchase price of the goods Fixed order costs is P48 Three days are required for delivery. What is the EOQ? How many orders should Warriors placed each year? How many units must be order every time? Calculate the total cost of ordering and carrying cost if the order quantity is 4,000 units 4,800 units 6,000 units At EOQarrow_forward
- Please do not give solution in image format thanku What are order cycle costs if annual demand is 8,000 units, with the following order quantities and annual order cost is $97? a. Order quantity of 1,000 = b. Order quantity of 500 = C. Order qty of 8,000 =arrow_forwardDescribe how a quantity based inventory system differs from one that employs a fixed time with the help of example ?arrow_forward1. Why is accurate inventory such an important issue at Wheeled Coach? 2. Why does Wheeled Coach have excess inventory, and what kind of a plan would you suggest for dealing with it? 3. Be specific in your suggestions for reducing inventory and how to implement them. *You may wish to view the video that accompanies this case beforearrow_forward
- Samantha Ross is the procurement manager for the headquarters of a large Financial company chain with a central inventory operation. Ross’ quick-moving inventory item has a demand of 7,000 units per year. Each unit cost $120, and the inventory holding cost is $15 per unit per year. The average ordering cost is $31 per order. It takes about 6 days for an order to arrive. (This is a corporate 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?arrow_forwardDennis Sport World, a chain of sporting goods stores, sells 360,000 tennis balls per year. The tennis balls cost Dennis Sport World RM15 per dozen. Annual inventory carrying costs are 20 percent of inventory price. The cost of placing and receiving an order are RM72. Assume the inventory replenishment occurs virtually instantaneously. Based on recent experience, Dennis Sport World uses 7 days delivery time for planning purposes. (Assume 360 days in a year) TASKS a) Calculate the Economic Order Quantity. b) Calculate the number of orders to be placed. c) Calculate the total annual inventory costs. d) Determine the reorder point.arrow_forwardUsing the same information, how do I: Determine the total inventory-related costs associated with the optimal ordering policy (do not include the cost of the coal). and If 5 days of lead time are required to receive an order of coal, how much coal should be on hand when an order is placed?arrow_forward
- Arrange a plan to order from the supplier using Part Period Balancing and Least Unit Cost method based on the data. Ordering lead time of the components is 1 period. Calculate the total cost of each method.arrow_forwardCompare and contrast the fixed quantity and fixed interval versions of EOQ. In what contexts will each be appropriate?arrow_forwardSamantha Ross is the procurement manager for the headquarters of a large Financial company chain with a central inventory operation. Ross’ quick-moving inventory item has a demand of 7,000 units per year. Each unit cost $120, and the inventory holding cost is $15 per unit per year. The average ordering cost is $31 per order. It takes about 6 days for an order to arrive. (This is a corporate operation, and there are 250 working days per year.) g) What is the total annual cost? h) What is the ROP?arrow_forward
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