Concept explainers
(a)
Interpretation:
The optimal lot size the supermarket should order and the time between the placement of the order for the products.
Concept Introduction:
The economic order quantity, often called EOQ refers to the order quantity that helps the organization in minimizing the ordering and holding cost of the organization’s business.
(b)
Interpretation:
The reorder point based on the on-hand inventory if the procurement lead time is two months.
Concept Introduction:
The re-order level refers to the inventory level at which an organization would place a new order or begin a new manufacturing run.
(c)
Interpretation:
The annual profit (exclusive of overhead and labor costs) for the product if it sells at the price of 99 cents.
Concept Introduction:
Inventory management is nothing but the process of ordering, storing, and utilizing the organization’s inventory.
Want to see the full answer?
Check out a sample textbook solutionChapter 4 Solutions
EBK PRODUCTION AND OPERATIONS ANALYSIS
- I NEED IT TODAY, 1. B&H needs to decide how to manage its inventory of cameras. The demand for cameras at B&H is 200 cameras per week. Each time that B&H places an order for a new shipment of cameras, it must pay $80 in fixed processing fees. A camera costs B&H $60 to purchase. The cost for B&H to hold a camera in its store for one week is $4. Assume that the lead time for the delivery of a camera is 0 weeks.a. Suppose that B&H places orders for cameras in quantities of 50 cameras at a time and places a new order for cameras each time that it runs out. Draw a graph showing the number of cameras that B&H has on-hand in inventory at each point in time up until the time when it places its fourth order. Label the points in time at which B&H places a new order. Assume that B&H places its first order for 50 cameras on day 0.b. Suppose again that B&H places orders for 50 cameras at a time. What will be B&H’s average holding costs per week? What will…arrow_forwardAmong the following multi-period inventory models, which one has the highest probability of stockout? A. Fixed Order Quantity with Safety Stock B. Fixed Time Period Model C. Fixed Order Quantity D. Both Fixed Order Quantity & Fixed Order Quantity with Safety Stockarrow_forwardTorrance Refinery produces approximately 23.1 Million barrels of gasoline per year. A California distributor sources its gasoline from the Torrance refinery. The annual demand for gasoline at the California distributor is 5.3 Million barrels. The cost of storing gasoline is approximately $29 per barrel (per year). The cost of placing an order to the Torrance refinery (including shipping) is $7300 per order. Orders will be received gradually instead of delivered all at once (hence EPQ). At what quantity will the total cost of procurement be the lowest? Round your answer to the nearest whole number. Do NOT include a comma. For example, answer like 103542 and NOT 103,542 Answer: 58845 Checkarrow_forward
- Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every three weeks. Data for both products are as follows: A. Find the total inventory costs if using inventory policy. This is a case considering safety stock (make sure to use the right formula)arrow_forwardChicago’s Treadway Tires Dealer must order tires fromits national warehouse. It costs $10,000 to place an orderand $400 to review the inventory level. Annual tire sales are N(20,000, 4,000,000). It costs $10 per year to hold a tire ininventory, and each order arrives two weeks after beingplaced (52 weeks 1 year). Assume that all shortages arebacklogged.a Estimate R and the number of orders per year thatshould be placed.b Using the answer in part (a), determine the optimal(R, S) inventory policy. Assume that the shortage cost is$100 per tire.arrow_forward#5. Consider a product that is stocked using periodic review inventory policy. Orders are placed every 21 days, and shipment lead time is four days. Daily demand is normally distributed with a mean of 58 and standard deviation of 16; fulfillment policy is at 97%. You have to do the following: (b) If the current stock is 398, and we are about to place an order, how much do we order?.arrow_forward
- 5. Why can it be bad business practice to not maintain adequate inventory? A. Results in high inventory carrying costs B. Results in a long average collection period C. Can result in stockouts and lost business D. Can result in a long average payment period E. None of the above 6. Splodnick Corporation sells 40,000 units of nebulous ambiguities every year. It costs them $100 to order more units, regardless of the order size. It costs Splodnick 63 cents per year to carry each unit. Using the Economic Order Quantity model, what should be Splodnick’s optimal number of units per order? Round your answer to the nearest whole number of units. A. 356 B. 3,563 C. 283 D. 178 E. None of the abovearrow_forwardJim's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every three weeks. Data for both products are as follows: a. What is the inventory control system for Tegdiws? Reorder quantity = 1,225 Reorder point = 824.24 b. Find the total inventory costs if using inventory policy. This is a case considering safety stock (Do not use Excel, show your work) Holding cost per unit per year is given as a percentage of item cost ITEM TEGDIW WIDGET Annual Demand 10,000 5,000 Holding cost (% of item cost) 20% 20% Set up or order cost $150.00 $25.00 Lead Time 4 weeks 1 week Safety stock 55 units 5 units Item cost $10.00 $2.00arrow_forwardWhat is the relationship between the average inventory and the in-stock probability?a. The more the inventory, the lower the in-stock probability.b. There isn’t a definitive relationship—more inventory could mean a lower or a higherin-stock probability.c. The more the inventory, the higher the in-stock probability.arrow_forward
- The Sofaworld Company purchases upholstery materialfrom Barrett Textiles. The company uses 45,000 yards ofmaterial per year to make sofas. The cost of ordering material from the textile company is $1,500 per order. It costsSofaworld $0.70 per yard annually to hold a yard of material in inventory. Determine the optimal number of yards ofmaterial Sofaworld should order, the minimum total inventory cost, the optimal number of orders per year, and theoptimal time between orders.arrow_forwardA specialty coffeehouse sells Colombian coffee at a fairly steady rate of 280 pounds annually. The beans are purchased from a local supplier for $2.40 per pound. The coffeehouse estimates that it costs $45 in paperwork and labor to place an order for the coffee, and holding costs are based on a 20 percent annual interest rate.a. Determine the optimal order quantity for Colombian coffee.b. What is the time between placement of orders?c. What is the average annual cost of holding and setup due to this item?d. If replenishment lead time is three weeks, determine the reorder level based on the on-hand inventory.arrow_forwardJill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every three weeks. Data for both products are as follows: a. What is the inventory control system for Tegdiws? That is, what is the reorder quantity and what is the reorder point? b. Find the total inventory costs if using inventory policy. This is a case considering safety stock (make sure to use the right formulas)arrow_forward
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning