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
Question
Chapter 12, Problem 17P
a)
Summary Introduction
To calculate: The economic order quantity (EOQ).
Introduction:
Economic order quantity (EOQ):
EOQ is the quantity of units a company must add to its inventory so as to minimize the total inventory costs. It will determine the ideal order quantity which will decrease the inventory management costs.
b)
Summary Introduction
To determine: The optimal number of orders per year.
Introduction:
Optimal number of orders:
The optimal number of orders is the number of orders a firm has to make such that the overall inventory cost is minimized.
c)
Summary Introduction
To calculate: The average inventory.
d)
Summary Introduction
To determine: The ordering cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Mo.
M. Cotteleer Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other homes applliences. demand of 265 units, which is constant throughout the year.The carrying cost is estimated to be $1.25 per unit per year and the ordering cost is $19 per order . Please show your work for full points. (a) To minimize cost, how many units should be ordered each time an order is placed? (b) How many orders are needed per year with the optimal policy? (c) What is the total annual cost of orderieg and holding inventory?
M. Cotteleer Electronics supplies microcomputercircuitry to a company that incorporates microprocessors intorefrigerators and other home appliances. One of the components
has an annual demand of 250 units, and this is constant through-out the year. Carrying cost is estimated to be $1 per unit per year,
and the ordering (setup) cost is $20 per order.a) To minimize cost, how many units should be ordered eachtime an order is placed?b) How many orders per year are needed with the optimal policy?c) What is the average inventory if costs are minimized?d) Suppose that the ordering (setup) cost is not $20, and Cotteleerhas been ordering 150 units each time an order is placed. Forthis order policy (of Q 5 150) to be optimal, determine whatthe ordering (setup) cost would have to be.
M. Cotteleer Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of Cotteleer’s components has an annual demand of 265 units, which is constant throughout the year. The carrying cost is estimated to be $1.25 per unit per year, and the ordering cost is $19 per order. Please show your work for full points.
(a) To minimize cost, how many units should be ordered each time an order is placed?
(b) How many orders are needed per year with the optimal policy?
(c) What is the total annual cost of ordering and holding inventory?
undefined
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
- Wood County Hospital consumes 1,000 boxes of bandagesper week. The price of bandages is $35 per box, and thehospital operates 52 weeks per year. The cost of processingan order is $15, and the cost of holding one box for a year is15 percent of the value of the material.a. The hospital orders bandages in lot sizes of 900 boxes.What extra cost does the hospital incur, which it couldsave by using the EOQ method?b. Demand is normally distributed, with a standard devia-tion of weekly demand of 100 boxes. The lead time is2 weeks. What safety stock is necessary if the hospital usesa continuous review system and a 97 percent cycle-servicelevel is desired? What should be the reorder point?c. If the hospital uses a periodic review system, with P = 2weeks, what should be the target inventory level, T?arrow_forwardMeena 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.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_forward
- Corry Corporation purchases 1,200,000 unit per year of one component. The Fixed Cost per order is $25. The annual carrying cost of the item is 27% of its $2 cost. Show Computations and Explanations. Determine the EOQ under each of the following conditions: A. Using the same data above, compute the EOQ. (Format: 11,111) B. What if the order cost is zero, what is the EOQ? (Format: 11,111)arrow_forwardA jewelry firm buys semiprecious stones to make bracelets and rings. The supplier quotes a price of $8.50 per stone for quantities of 600 stones ore more, $8.90 per stone for orders of 400 to 599 stones, and $9.40 per stone for lesser quantities. The jewelry firm operates 104 days per year. Usage rate is 22 stones per day, and ordering costs are $42. Do not round intermediate calculations. a. If carrying costs are $2 per year for each stone, find the order quantity that will minimize total annual cost. b. If annual carrying costs are 24 percent of unit cos, what is the optimal order size? c. If lead time is 3 working days, at which point should the company reorder?arrow_forwardA jewelry firm buys semiprecious stones to make bracelets and rings. The supplier quotes a price of $8.70 per stone for quantities of 600 stones or more, $9.20 per stone for orders of 400 to 599 stones, and $10.00 per stone for lesser quantities. The jewelry firm operates 109 days per year. Usage rate is 25 stones per day, and ordering costs are $48. a. If carrying costs are $2 per year for each stone, find the order quantity that will minimize total annual cost. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) b. If annual carrying costs are 29 percent of unit cost, what is the optimal order size? (Do not round intermediate calculations. Round your final answer to the nearest whole number.) c. If lead time is 3 working days, at what point should the company reorder? (Do not round intermediate calculations. Round your final answer to the nearest whole number.)arrow_forward
- 1. Maxmin Trading Company buys 1,000 pcs of chair per month. The cost per chair is Php500 and ordering cost is Php400. The inventory carrying cost is estimated at 10% of the price of the chair. Determine the EOQ.arrow_forwardA jewelry firm buys semiprecious stones to make bracelets and rings. The supplier quotes a priceof $8 per stone for quantities of 600 stones or more, $9 per stone for orders of 400 to 599 stones,and $10 per stone for lesser quantities. The jewelry firm operates 200 days per year. Usage rate is25 stones per day, and ordering costs are $48.a. If carrying costs are $2 per year for each stone, find the order quantity that will minimize totalannual cost.b. If annual carrying costs are 30 percent of unit cost, what is the optimal order size?c. If lead time is six working days, at what point should the company reorder?arrow_forwardThe mythical Own Distributors has an annual demand of 2,000 units for itshandheld security wands. The average cost of the handheld security wand isUS$140. Carrying cost is 18% of the unit cost of the security wand. Orderingcosts are US$30 per order. If the company orders in quantities of 500 or more,it can get a 6% discount on the unit cost of the security wand. Should the OwenDistributors take the quantity discount?arrow_forward
- Davis Supply maintains an average inventory of 2,000 dinosaur skulls for sale to filmmakers. The carrying cost per skull per year is estimated to be $150.00 and the fixed order cost is $96. What is the economic order quantity (EOQ)? (Round to the nearest whole number.)arrow_forwardWang Distributors has an annual demand for anairport metal detector of 1,400 units. The cost of a typicaldetector to Wang is $400. Carrying cost is estimated to be 20%of the unit cost, and the ordering cost is $25 per order. If PingWang, the owner, orders in quantities of 300 or more, he canget a 5% discount on the cost of the detectors. Should Wangtake the quantity discount?arrow_forwardThe Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat annually. The wheat must be purchased in multiples of 2,000 bushels. Ordering costs, which include grain elevator removal charges of P3,500, are P5,000 per order. Annual carrying costs are 2 percent of the purchase price of P5 per bushel. The company maintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. 1. What is the EOQ? 2. At what inventory level should an order be placed to prevent having to draw on the safety stock? 3. What are the total inventory costs, including the costs of carrying the safety stock? 4. The wheat processor agrees to pay the elevator removal charges if Strawberry Bread will purchase wheat in quantities of 650,000 bushels. Would it be to Strawberry Bread’s advantage to order under this alternative?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill EducationOperations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningProduction and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
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
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY