Concept explainers
a)
To determine: ABC classification for the items.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
b)
To determine:The Economic order quantity.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
c)
To determine:The Economic production quantity.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
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EBK OPERATIONS MANAGEMENT
- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardExplain the Purchasing Portfolio that is being used in KFC with a diagramarrow_forwardDetermine which factor of production is needed in the following problem. 1.The ABM manufacturing Co.hired a gardener.He uses a lawn mower for landscaping.Which factor of production would you consider this machine? 2.The owner of the company withdrew cash for the salaries of thw employees.which factor of production would you consider cash on hand? 3.The top manager of the firm said "the great ideas,consepts and emotional determination of a person to produce something that consumers want to buy" is very important for the company.What factor of production describes the ability to create great ideas? 4.The farmers planted pineapple cutting in the vacant area located in their locality.Which factor of production would you consider a pineapple plantation?arrow_forward
- Hau Lee Furniture, Inc., spends 50% of its sales dollars in the supply chain and finds its current profit of $28,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau would like to improve the profit line to $33,000 so he can obtain the bank's approval for the loan. Current Situation Sales $140,000 Cost of material $70,000 (50%) Production costs $28,000 (20%) Fixed cost $14,000 (10%) Profit $28,000 (20%) Part 2 a) What percentage improvement is needed in the supply chain strategy for profit to improve to $33,000? What…arrow_forwardA firm’s cost of goods sold last year was $3,410,000, and the firm operates 52 weeks per year. It carries seven items in inventory: three raw materials, two work-in-process items, and two finished goods. The following table contains last year’s average inventory level for each item, along with its value. a. What is the average aggregate inventory value? b. How many weeks of supply does the firm maintain? c. What was the inventory turnover last year? Category Part Number Average Level Unit Value Raw materials Work-in-process Finished goods 1 2 3 4 5 6 7 15000 2500 3000 5000 4000 2000 1000 $3.00 5.00 1.00 14.00 18.00 48.00 62.00arrow_forwardOver the past 12 months, Super Toy Mart hasexperienced a demand variance of 10,000 units and has produced an order variance of 12,000 units.a) What is the bullwhip measure for Super Toy Mart?b) If Super Toy Mart had made a perfect forecast of demandover the past 12 months and had decided to order 1/12 ofthat annual demand each month, what would its bullwhipmeasure have been?arrow_forward
- One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 200,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally, administrative costs are estimated at $20 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.011 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that overhead be allocated if the parts are made in-house…arrow_forwardA firm’s cost of goods sold last year was $3,410,000, and the firm operates 52 weeks per year. It carries seven items in inventory: three raw materials, two work-in-process items, and two finished goods. The following table contains last year’s average inventory level for each item, along with its value. a. What is the average aggregate inventory value? b. How many weeks of supply does the firm maintain? c. What was the inventory turnover last year?arrow_forwardGary’s Seasoning wants to increase its capacity by adding more blending and packagingmachines. Two vendors have presented proposals. Vendor A’s equipment costs $11,500 and the variable cost per unit is $2.00. Vendor B’s equipment costs $13,500 and the variable cost per unit is $1.75. Selling price for each seasoning packet for $4.00.a. What is the break-even point for each proposal?b. If the expected volume is 7,500 packages, which vendor should be chosen? (Show all calculations to earn full credit)arrow_forward
- Gregory has started a small agricultural business that specialises in maize and sunflower seeds inGrey Town, KZN. His produce is AgriSA approved, and his organisation is looking to hire a supply chain management consultant given their impact and contribution to the local economy. You have been recruited by Gregory, assist him with the following questions: Gregory is uncertain as to which replenishment system he should use. Differentiate between the continuous review and periodic review models and suggest the most suited for him with the aid of at least two practical examples.Note: you are required to provide a paraphrased overview of the models before at least two practical examples are provided to support the choice.arrow_forwardWhat events might occur when an organization is out of stock of a needed product? How might the cost of a stock out be calculated?arrow_forwardI need question D solved please (a) What was their average aggregate inventory value? =46,410,239(b) What was their average inventory (measured in weeks of supply)? =6.97(c) What was their inventory turnover?=7.1771BIT operates on a build-to-stock policy, and therefore stores its finishedgoods in a warehouse capable of housing up to 70,000 units. Its annual overhead cost (fixed cost) is $117,000; and it costs $3/unit to house the finished goods. BIT has been approached by a warehouse company offering to house the finished goods for a unit cost of $4.5/unit, with an annual contract cost of $30,000. (d) Should BIT continue operating its own warehouse, or should it employthe warehouse company? Why?arrow_forward
- MarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational PublishingPurchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning