Operations Management
2nd Edition
ISBN: 9781260484687
Author: CACHON, Gerard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 14, Problem 15CQ
Summary Introduction
To identify: The course of action that will lead to a higher order-up-to level.
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A product’s demand over (l + 1) periods is normally distributed with a mean of 100 and standard deviation of 10. Lead time is 2 periods. The order-up-to model is used to manage inventory. If in-stock probability stays at 99%, what will happen to expected on-hand inventory when expected demand increases to 200?
A) It will increase.
B) It will stay the same.
C) It will decrease.
D) It may either increase or decrease.
The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is cons
days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average.
is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal.) It costs $40 to place an
Time left 1:45:28
order, and the annual holding cost is 30% of the inventory value. The supplier charges $8.00 per unit.
Find the economic order quantity (EOQ).
O a. 1788
O b. 346
O c. 36
Od. 632
The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is constant at five
days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average daily demand
is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal) It costs $40 to place an
order, and the annual holding cost is 30% of the inventory value. The supplier…
. Suppose inventory is managed using the order-up-to model. Which of the following actions will certainly lead to a higher order-up-to level? In all cases, assume thecharacteristics of the demand process do not change. I. Increase in the target in-stock probability (for the same lead time)II. Increase in the lead time (for the same in-stock probability)a. I onlyb. II onlyc. I and IId. None of the above
Chapter 14 Solutions
Operations Management
Ch. 14 - Demand in each period follows the same normal...Ch. 14 - Prob. 2CQCh. 14 - For products with slow-moving demandfor example,...Ch. 14 - Prob. 4CQCh. 14 - Prob. 5CQCh. 14 - Prob. 6CQCh. 14 - Prob. 7CQCh. 14 - Prob. 8CQCh. 14 - If the target in-stock probability increases, then...Ch. 14 - Prob. 10CQ
Ch. 14 - Prob. 11CQCh. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Prob. 14CQCh. 14 - Prob. 15CQCh. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Prob. 18CQCh. 14 - Prob. 19CQCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - You are the owner of Hotspices.com, an online...Ch. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Prob. 11PACh. 14 - Prob. 1CCh. 14 - Prob. 2CCh. 14 - Prob. 3CCh. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...Ch. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...
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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
- Which one of the following variables is not explicitly considered in the computation of the Economic Order Quantity? a. Per unit per year cost of storage and storage insurance for the inventories purchased b. Annual quantity forecasted by the firm that will satisfy the demand of the customers c. Any deductions from the selling price granted by the suppliers to the buyers due to certain quantities reached d. Ordering or transaction cost that must be constant regardless of quantity orderedarrow_forward1- The number of orders in the inventory system (called A) is total demand (called D) divided D by order size per replenishment (called S) or A =". D follows a normal distribution with a mean of 100,000 and standard deviation of 5000. While S is a continuous uniform distribution between 20,000 and 30,000. Generate 500 A random number and find the average.arrow_forwardFor a company operating 300 days a year, the annual demand is 63,000 units, the lead time is 4 days, the ordering cost per order is BD 80 and the inventory turnover is 12, the reorder point is A. Every 12 days B. Every 4 days C. When 175 units remain D. When 840 units remainarrow_forward
- A store has collected the following information on one of its products:Demand = 4,500 units/year Standard deviation of weekly demand = 12 units Ordering costs = $40/order Holding costs = $3/unit/year Cycle-service level = 90% (z for 90% = 1.28) Lead-time = 2 weeks Number of weeks per year = 52 weeks a. If a firm uses the continuous review system to control the inventory, what would be the order quantity and reorder point?arrow_forwardIn the basic EOQ model, the average inventory level is equal to one-halfthis value: A. Maximum inventory level.B. Order quantity.C. Reorder pointD. Both A and B.arrow_forwardTi Which of the following statements about the basic EOQ model is true? O a. If the carrying cost were to increase, the EOQ would fall. O b. If annual demand were to double, the number of orders per year would increase. O c. If the ordering cost were to double, the EOQ would rise. O d. If annual demand were to double, the EOQ would increase. O e. All of these. PAGE NEarrow_forward
- XYZ Company must order tires from its warehouse. It costs $10550 to place an order and to review the inventory level. Annual tire sales are normally distributed with mean 20000 and variance 4,000,000. It costs $10 per year to hold a tire in inventory, and each order arrives two weeks after being placed. The Company uses periodic review (R, S) policy. What is the review interval R (in years), estimated using EOQ.? Select one: a. 1.027 O b.0.1083 c. 0.2297 d. 0.1624 e. 0.3248arrow_forwardA product’s demand in each period follows a normal distribution with mean of 60 and standard deviation of 10. The order-up-to level is 270 and the lead time is 2 weeks. Orders are placed every 2 weeks. What is the expected on-hand inventory? 140 80 31 8arrow_forwardXYZ Company must order tires from its warehouse. It costs $10400 to place an order and to review the inventory level. Annual tire sales are normally distributed with mean 18000 and variance 4,000,000. It costs $8 per year to hold a tire in inventory, and each order arrives two weeks after being placed. The Company uses periodic review (R, S) policy. What is the review interval R (in years), estimated using EOQ.? Select one: a. 0.3801 b. 0.19 c. 0.2687 d. 1.075 e. 0.1267arrow_forward
- An electronics retailer wants to develop an inventory policy to achieve 99% chance of not getting stockouts for a chip. The daily demand for the chip is estimated to be Normal with mean 200 and standard deviation of 20. They count the chip inventory every 2 weeks to place an order, and it takes 11 days for the ordered chips to be delivered. The retailer operates 7 days a week, 365 days a year. They are going to implement an order-up-to model. A) What base stock level should they choose? B) What is the number of chips they would have on order (on average)? C) When they checked their inventory of chips to place a new order, they found that they ran out of stock completely. In addition, they have 10 chips on way to be delivered, while there are five customers who paid for 20 chips in total and are waiting to receive their chips. How many chips should the retailer order?arrow_forwardA newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car. Daily paper sales are normally distributed, with a mean of 100 and standard deviation of 10 He sells papers for $0.50 and pays $0.30 for them Unsold papers are trashed with no salvage value. How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues? B I Sarrow_forwardItem X is a standard item stocked in a company’s inventory of component parts. Each year, the firm, on a random basis, uses about 2,000 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $5 per unit of averageinventory. Every time an order is placed for more of item X, it costs $10.a. Whenever item X is ordered, what should the order size be?b. What is the annual cost for ordering item X?c. What is the annual cost for storing item X?arrow_forward
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