EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 12, Problem 11PA
Summary Introduction
Interpretation:Days of supply inventory the firm is holding is to be calculated.
Concept Introduction:Days of supply inventory tells how many days the inventory will last based on the sales of the organization. In order to ensure that the company will not run short of inventory it is essential that they calculate the days of supply inventory to avoid the risks in supply.
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Do the following:
Inventory
• What kind of inventory will you keep: raw materials, supplies, finished goods?
• Average value in stock (i.e., what is your inventory investment)?
• Rate of turnover and how this compares to the industry averages?
• Seasonal buildups?
• Lead-time for ordering?
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The following details are provided: Annual demand is 9,000 units, cost per order is $55, holding costs are estimated to be $16 per unit per year. The business operates 312 days per year. The delivery lead time is 2 days. Calculate the number of orders. NOTE: round only your ROP answer to 2 decimal places.
A restaurant has annual sales of $420,000, an average inventory of $6000, and an annualcost of goods sold of $264,000. What are the restaurant’s days-of-supply of inventory?(Assume 365 days per year.)
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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 McDonald’s fast-food restaurant on campus sells an average of 4,000 quarter-pound hamburgers each week. Hamburger patties are resupplied twice a week, and on average the store has 350 pounds of hamburger in stock. Assume that the hamburger patties cost $1.00 a pound. What is the inventory turnover for the hamburger patties? On average, how many days of supply are on-hand? (Answer in Appendix D)arrow_forwardA restaurant has annual sales of $420,000, an average inventory of $6000, and an annualcost of goods sold of $264,000. What is the restaurant’s monthly inventory turns?arrow_forwardBased on the following information, how many days of supply of inventory is the firm holding (assuming 260 days of operation per year)? Do not round intermediate calculations. Round your answer to one decimal place. Sales $8,300,000 Cost of goods sold $7,540,000 Gross profit $760,000 Overhead costs $600,000 Net profit $160,000 Total inventory $2,600,000 Fixed assets $3,100,000 Long-term debt $2,300,000 a. 89.7 days b. 286.2 days c. 81.4 days d. 236.2 daysarrow_forward
- Which of the following statements is not true about efficient supply chains? a. Lower cost through high utilization b. The primary goals is to supply demand at the lowest cost c. Suppliers are selected based on cost and quality. d. Maintain capacity/flexibility to buffer against demand/supply uncertainty.arrow_forwardWhat is the relationship between inventory and the nine competitive priorities we discussed in Chapter 1, ”Using Operations to Create Value”? Suppose that two competing manufacturers, Company H and Company L, are similar except that Company H has much higher investments in raw materials, work-in-process, and finished goods inventory than Company L. In which of the nine competitive priorities will Company H have an advantage?arrow_forwardA food processor uses approximately 27,000 glass jars a month for its fruit juice products. Because of storage limitations, a lot size of 4000 jars has been used. Monthly holding cost is $0.18 per jar, and reordering cost is $60 per order. Please answer the following questions by attaching your answers in a Word or Excel document. Show all work. Round up your answers where relevant. 1. What penalty is the company incurring by its present order size. Hint: compare the cost incurred as a result of using the current order size of 4000 jars versus the cost that would be incurred as a result of using the EOQ lot size. 2. What is the number of orders per month that would be placed if the company uses the EOQ order? 3. What is the maximum number of jars that are held in inventory in a given ordering cycle using the EOQ? 4. Assume that the firm operates 30 days per month and the lead time (LT) for each order is 5 days. What is the reorder point (ROP)? Verbally interpret the meaning of this…arrow_forward
- In a continuous review inventory system, the lead time for doorknobs is 5 weeks. The standard deviation of demand during thelead time is 85 units. The desired cycle-service level is 99 per-cent. The supplier of door knobs streamlined its operations andnow quotes a one-week lead time. How much can safety stockbe reduced without reducing the 99 percent cycle-service level?arrow_forwardIf average inventory is 3,75,000 and closing inventory is 30,000 less than opening inventory, then find the opening inventory?arrow_forwardLast year, the retailer’s weekly variance of demand was 200 units. The variance of orders was 500, 600, 750, and 1,350 units for the retailer, wholesaler, distributor, and manufacturer, respectively.a) Calculate the bullwhip measure for the retailer.b) Calculate the bullwhip measure for the wholesaler.c) Calculate the bullwhip measure for the distributor.d) Calculate the bullwhip measure for the manufacturer.e) Which firm appears to be contributing the most to the bull-whip effect in this supplychain?arrow_forward
- Although organisations in the manufacturing sector usually carry more inventory than service firms, effective inventory management is nonetheless important to both manufacturers and service organisations’ (Heizer and Render, 2021). Considering this statement examine the functions of inventory and advise operations managers on how they can determine the right inventory to hold at any given time.arrow_forwardCharles cycles produces bicycles and tricycles.The setup cost when switching production from one to the other is $3300. On average,retail customers order 240 tricycles per day (consider a 250-day year). The daily production rate for tricycles is 830 units. Unit cost of a tricycle is $84 and the company has determined inventory carrying cost to be 15%. What should the production order quantity in units be ? (Round up the answer to the next whole number?arrow_forwardThe standard deviation of daily demand for an item is 100 units per day. The lead time for the item is 2 weeks. What is the standard deviation of the lead time period if your company operates 7 days per week?,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