The cost of underestimating the demand. Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

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Answer 1

Question

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

b)

Summary Introduction

To determine: The overage cost per program.

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

d)

Summary Introduction

To determine: The stock out risk for the order size.

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University of Florida football programs are printed 1 week prior to each home game. Attendance averages 90,000 screaming and loyal Gators fans, of whom two-thirds usually buy the program, following a normal distribution, for $5 each. Unsold programs are sent to a recycling center that pays only 10 cents per program. The standard deviation is 5,000 programs, and the cost to print each program is $2. Refer to the standard normal table for z-values. Part 2 a) What is the cost of underestimating demand for each program? Cs=$________ (round your response to two decimal places). Part 3 b) What is the overage cost per program? Co=$_______ (round your response to two decimal places). Part 4 c) How many programs should be ordered per game? ________ programs should be ordered per game (round your response to the nearest whole number). Part 5 d) What is the stockout risk for this order size? Stockout risk=________ (round your response to four decimal places).

University of Florida football programs areprinted 1 week prior to each home game. Attendance averages90,000 screaming and loyal Gators fans, of whom two-thirdsusually buy the program, following a normal distribution, for$4 each. Unsold programs are sent to a recycling center thatpays only 10 cents per program. The standard deviation is5,000 programs, and the cost to print each program is $1.a) What is the cost of underestimating demand for eachprogram?b) What is the overage cost per program?c) How many programs should be ordered per game?d) What is the stockout risk for this order size?

Annual demand for a product is 13,000 units; weekly demand is 250 units with a standard deviation of 40 units. The cost of placing an order is $100, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.65 per unit. To provide a 98 percent service probability, what must the reorder point be? Suppose the production manager is told to reduce the safety stock of this item by 100 units. If this is done, what will the new service probability be?

Answer 2

Question

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

b)

Summary Introduction

To determine: The overage cost per program.

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

d)

Summary Introduction

To determine: The stock out risk for the order size.

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Answer 3

Question

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

b)

Summary Introduction

To determine: The overage cost per program.

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

d)

Summary Introduction

To determine: The stock out risk for the order size.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

b)

Summary Introduction

To determine: The overage cost per program.

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

d)

Summary Introduction

To determine: The stock out risk for the order size.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

b)

Summary Introduction

To determine: The overage cost per program.

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

d)

Summary Introduction

To determine: The stock out risk for the order size.

Answer 6

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

Answer 7

Chapter 12, Problem 53P

a)

Summary Introduction

To determine: The cost of underestimating the demand.

Introduction: Inventory management is the process of ordering, storing and using inventory of the company such raw material, components and finished goods. It governs the flow of goods from manufacturers to warehouse and to the point of sale. The key function is to maintain record of flow of new or returned products which enters or leaves the company.

Answer 8

b)

Summary Introduction

To determine: The overage cost per program.

Answer 9

b)

Summary Introduction

To determine: The overage cost per program.

Answer 10

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

Answer 11

c)

Summary Introduction

To determine: The number of programs to be ordered per game.

Answer 12

d)

Summary Introduction

To determine: The stock out risk for the order size.

Answer 13

d)

Summary Introduction

To determine: The stock out risk for the order size.

Answer 14

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Answer 15

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Answer 16

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Answer 17

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Solution Summary: The author explains the cost of underestimating demand and the overage cost per program.

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To determine: The overage cost per program.

To determine: The number of programs to be ordered per game.

To determine: The stock out risk for the order size.

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