Principles Of Operations Management
11th Edition
ISBN: 9780135173930
Author: RENDER, Barry, HEIZER, Jay, Munson, Chuck
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 12, Problem 14P
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas’s fastest-moving inventory item has a 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 average 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 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?
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 of the 6,000 units?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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?
Please do not give solution in image formate thanku
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 5,900 units per year. The cost of each unit is $98, and the inventory carrying cost is $11 per unit per year. The average ordering cost is $31 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 118 units. (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?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 cost of the 6,100 units?
Please do not give solution in image format thanku
A mail-order house uses 16,820 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The following price schedule applies. Number of Boxes Price per Box 1,000 to 1,999 $1.25 2,000 to 4,999 1.20 5,000 to 9,999 1.15 10,000 or more 1.10 a. Determine the optimal order quantity. (Round your answer to the nearest whole number.) Optimal order quantity boxes b. Determine the number of orders per year.
Chapter 12 Solutions
Principles Of Operations Management
Ch. 12 - Ethical Dilemma Wayne Hills Hospital in tiny...Ch. 12 - Prob. 1DQCh. 12 - Prob. 2DQCh. 12 - What is the purpose of the ABC classification...Ch. 12 - Prob. 4DQCh. 12 - Explain the major assumptions of the basic EOQ...Ch. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - What impact does a decrease in setup time hive on...
Ch. 12 - Prob. 10DQCh. 12 - Prob. 11DQCh. 12 - Explain the following: All things being equal, the...Ch. 12 - Prob. 13DQCh. 12 - Prob. 14DQCh. 12 - Prob. 15DQCh. 12 - When demand is not constant, the reorder point is...Ch. 12 - Prob. 17DQCh. 12 - State a major advantage, and a major disadvantage,...Ch. 12 - L. Houts Plastics it a large manufacturer of...Ch. 12 - Prob. 2PCh. 12 - Jean-Mane Bourjollys restaurant has the following...Ch. 12 - Lindsay Electronics, a small manufacturer of...Ch. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - William Sevilles computer training school, in...Ch. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Matthew Liotines Dream Store sells beds and...Ch. 12 - Southeastern Bell stocks a certain switch...Ch. 12 - Lead time for one of your fastest-moving products...Ch. 12 - Annual demand for the notebook binders at Duncans...Ch. 12 - Thomas Kratzer is the purchasing manager for the...Ch. 12 - Joe Henrys machine shop uses 2,500 brackets during...Ch. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Cesar Rego Computers, a Mississippi chain of...Ch. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - M. P. VanOyen Manufacturing has gone out on bid...Ch. 12 - Chris Sandvig Irrigation, Inc., has summarized the...Ch. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Barbara Flynn is in charge of maintaining hospital...Ch. 12 - Prob. 42PCh. 12 - Authentic Thai rattan chairs (shown in the photo)...Ch. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Gainesville Cigar stocks Cuban agars that have...Ch. 12 - A gourmet coffee shop in downtown San Francisco is...Ch. 12 - Prob. 50PCh. 12 - Prob. 51PCh. 12 - Henrique Correas bakery prepares all its cakes...Ch. 12 - Prob. 53PCh. 12 - Prob. 1CSCh. 12 - Prob. 2CSCh. 12 - Prob. 3CSCh. 12 - Prob. 1.1VCCh. 12 - Prob. 1.2VCCh. 12 - Prob. 1.3VCCh. 12 - Prob. 1.4VCCh. 12 - Prob. 1.5VCCh. 12 - Prob. 1.6VCCh. 12 - Prob. 1.7VCCh. 12 - Prob. 2.1VCCh. 12 - Prob. 2.2VCCh. 12 - Prob. 2.3VCCh. 12 - Prob. 2.4VCCh. 12 - Inventory Control at Wheeled Coach Controlling...Ch. 12 - Prob. 3.2VCCh. 12 - Inventory Control at Wheeled Coach Controlling...
Knowledge Booster
Learn more about
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_forwardThe carrying cost curve and ordering cost curve of NEKO Inc.’s inventory intersect at 3,500 units. What is the total annual cost of inventory given that the annual demand is 75,000 units and the carrying cost per unit per year is P12arrow_forwardItems 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_forward
- Please do not give solution in image format thanku A small mail-order company uses 14,000 boxes a year. Holding cost rate is 18 percent of unit cost per year, and ordering cost is $33 per order. The following quantity discounts are available. Number of Boxes Price per Box 1,000 to 1,999 $1.15 2,000 to 4,999 1.10 5,000 to 9,999 1.05 10,000 or more 1.00 a. Determine the optimal order quantity. Optimal order quantity boxes b. Determine the number of orders per year. (Round the final answer to 1 decimal place.) No. of orders per yeararrow_forwardA pharmacist wants to establish an optimal inventory policy for a new antibiotic that requires refrigeration in storage. The pharmacist expects to sell 6000 packages of this antibiotic at a steady rate during the next year. She plans to place several orders of the same size spaced equally throughout the year. The ordering cost for each delivery is $15, and carrying costs, based on the average number of packages in inventory, amount to $8 per year for one package. Use this information to answer the following questions. a) Let x be the order quantity and r the number of orders placed during the year. Find the inventory cost (ordering cost plus carrying cost) in terms of x and r. b) Find the constraint function. c) Determine the economic order quantity that minimizes the inventory cost and then find the minimum inventory cost. X=__________ C=$___________arrow_forwardThe National Company uses 150,000 gallons of hydrochloric acid per month. The cost of carrying the chemical in inventory is 60 cents per gallon per year, and the cost of ordering the chemical is P150 per order. The firm uses the chemical at a constant rate throughout the year. The chemical's economic order quantity is?arrow_forward
- Assume that JAO, Inc., a manufacturer of electronic test equipment, uses 14,400 units of an item annually. Its order cost is P500 per order, and the carrying cost is P10 per unit per year. It requires 10 days to place and receive an order. 1. The ordering costs is 5,696 4,026 6,000 4,8002. The inventory costs is 6,000 12,000 9,600 8,052arrow_forwardEzrah is attempting to perform an inventory analysis on one of her most popular beauty products, the "Heavenly perfume. Annual demand for this product is 10,000 units with carrying costs of P50 per unit per year. The ordering costs for her company typically run P100 per order. Lead time averages 10 days( Assume 250 working days). Compute the total inventory costarrow_forwardSaga ltd. produces electronic toys for children between the ages of 7-10 years old. The toys use a processor that is imported from Japan. Annual demand for the processor is 12,500. The holding cost per processor per year is $2. Ordering cost per order is $400. Lead time is 7 days and the number of working days in the year is 250. d. What is the optimal number of days between any two orders? e. What is the reorder point? f. Given the EOQ, what is the total annual inventory cost?arrow_forward
- Petromax Enterprises uses a continuous review policy to manage the inventory for one of its SKUs. The following information is available on the item. The firm operates 50 weeks in a year. Demand = 90,000 units/year Ordering Cost = $60/Order Holding Cost = $3/Unit/Order Lead Time = 10 weeks Standard Deviation of Weekly Demand = 200 units Suppose due to some recent changes to the target service level, they have determined the reorder point to be 20,000. If the inventory position of this SKU is currently 19,600, how many units should they order? (Round your answer to the nearest whole number, if it has decimals. Input 0 if they should not order now.)arrow_forwardSurge Electric uses 4,000 toggle switches a year. Switches are priced as follows: 1 to 499, 90cents each; 500 to 999, 85 cents each; and 1,000 or more, 80 cents each. It costs approximately$30 to prepare an order and receive it, and carrying costs are 40 percent of purchase price perunit on an annual basis. Determine the optimal order quantity and the total annual cost.arrow_forwardA local service station is open 7 days per week, 365 days per year. Sales of 10W40 grade premium oil average 20 cans per day. Inventory holding costs are $0.50 per can per year. Ordering costs are $10 per order. The lead time is two weeks. Backorders are not practical— the motorist drives away.a. Based on these data, choose the appropriate inventory model and calculate the economic order quantity and reorder point. Describe in a sentence how the plan would work. Hint: Assume demand is deterministic.b. The boss is concerned about this model because the demand really varies. The standarddeviation of demand was determined from a data sample to be 6.15 cans per day. Themanager wants a 99.5 percent service probability. Determine a new inventory planbased on this information and the data in part (a). Use Qopt from part (a).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY