Production and Operations Analysis, Seventh Edition
7th Edition
ISBN: 9781478623069
Author: Steven Nahmias, Tava Lennon Olsen
Publisher: Waveland Press, Inc.
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 4.4, Problem 5P
Summary Introduction
To determine:
Percentage of annual sales that would be used for an inventory
Introduction:
Inventory control system is the system which increases overall system by keeping minimum inventory.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A Mercedes dealer pays $40,000 for each car purchased (wholesale price). The annual holding cost is estimated to be 30% of the dollar value of inventory. The dealer sells an average of 1200 cars per year. They believe that demand is backlogged but estimate that if they are short one car for one year, the loss in future profits is about 10% of the wholesale price. Each time the dealer places an order for cars, ordering costs amount to $1600. Assume there are 360 work days per year.
Question:
If the Mercedes dealer wants to limit backorders so that they occur 20% of the time, what is the maximum number of backorders that should be allowed (assuming the optimal order quantity doesn't change)?
Weekly demand for printers at a store is normally distributed with a mean of 250 and a standard deviation of 96. The store manager continuously monitors inventory and currently orders 14400 printers each time the inventory drops to 1,000printers. The supply lead time is normally distributed with a mean of 2 weeks and a standard deviation of 1.5 weeks.
a.How much safety inventory should this store carry if it wants to provide a CSL of 95%?
b.How does the required safety inventory change as the standard deviation of lead time is reduced from 1.5 weeks to zero in intervals of 0.5 weeks?
c.What fill rate does the store achieve?
Grand Styles Furniture Store is overstocked in (has excess inventory of) one type of chair. Based on the Price-Demand Relationship, what advice would you provide to the store manager to deal with this problem?
Fancy Fashions sells jeans for $59 and sweaters for $39. To increase sales of jeans and sweaters, Fancy Fashions promotes this Product Price Bundle: “Buy a pair of jeans and a sweater for $98”. Will this Product Price Bundle will work well to increase the sales of jeans and sweaters?
Chapter 4 Solutions
Production and Operations Analysis, Seventh Edition
Ch. 4.4 - Prob. 1PCh. 4.4 - Prob. 2PCh. 4.4 - Prob. 3PCh. 4.4 - Prob. 4PCh. 4.4 - Prob. 5PCh. 4.4 - Prob. 6PCh. 4.4 - Prob. 7PCh. 4.4 - Prob. 8PCh. 4.4 - Prob. 9PCh. 4.5 - Prob. 10P
Ch. 4.5 - Prob. 11PCh. 4.5 - Prob. 12PCh. 4.5 - Prob. 13PCh. 4.5 - Prob. 14PCh. 4.5 - Prob. 15PCh. 4.5 - Prob. 16PCh. 4.6 - Prob. 17PCh. 4.6 - Prob. 18PCh. 4.6 - Prob. 19PCh. 4.6 - Prob. 20PCh. 4.7 - Prob. 21PCh. 4.7 - Prob. 22PCh. 4.7 - Prob. 23PCh. 4.7 - Prob. 24PCh. 4.7 - Prob. 25PCh. 4.8 - Prob. 26PCh. 4.8 - Prob. 27PCh. 4.8 - Prob. 28PCh. 4.9 - Prob. 29PCh. 4.9 - Prob. 30PCh. 4 - Prob. 31APCh. 4 - Prob. 32APCh. 4 - Prob. 33APCh. 4 - Prob. 34APCh. 4 - Prob. 35APCh. 4 - Prob. 36APCh. 4 - Prob. 37APCh. 4 - Prob. 38APCh. 4 - Prob. 39APCh. 4 - Prob. 40APCh. 4 - Prob. 41APCh. 4 - Prob. 42APCh. 4 - Prob. 43APCh. 4 - Prob. 44APCh. 4 - Prob. 45AP
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
- A 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. For the situation described above, draw a graph of the amount of inventory on order. Using your graph, determine the average amount of inventory on order. Also compute the demand during the replenishment lead time. How do these two quantities differ?arrow_forwardA Mercedes dealer must pay $20,000 for each car purchased. The annual holding cost is estimated to be 25% of the dollar value of inventory. The dealer sells an average of 500 cars per year. He considers the lawsuit to be behind schedule but estimates that if he is short on one car in one year he will lose $20,000 worth of future profits. Each time the dealer places an order for automobiles, the ordering cost adds up to $10,000. Determine the distributor's optimal ordering policy. What is the maximum deficit that will occur? What is the total annual cost?arrow_forwardThe purchasing manager for the Atlantic Steel Company must determine a policy for orderingcoal to operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate,and the firm operates 360 days per year. The purchasing manager has determined that the orderingcost is $80 per order and the cost of holding coal is 20% of the average dollar value of inventoryheld. The purchasing manager has negotiated a contract to obtain the coal for $12 per ton forthe coming year. If 5 days of lead time are required to receive an order of coal, how much coal should be on hand when an order is placed?arrow_forward
- The purchasing manager for the Atlantic Steel Company must determine a policy for orderingcoal to operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate,and the firm operates 360 days per year. The purchasing manager has determined that the orderingcost is $80 per order and the cost of holding coal is 20% of the average dollar value of inventoryheld. The purchasing manager has negotiated a contract to obtain the coal for $12 per ton forthe coming year. Determine the optimal quantity of coal to receive in each order.arrow_forwardThe following lots of a particular commodity were available for sale during the year Beginning inventory 9 units at $47 First purchase 15 units at $50 Second purchase 20 units at $21 Third purchase 18 units at $58 The firm uses the periodic system, and there are 27 units of the commodity on hand at the end of the year. What is the ending inventory balance at the end of the year rounded to nearest dollar according to the average cost method? Do not round intermediate calculations. a.$1,269 b.$1,233 c.$1,323 d.$1,148arrow_forwardThe annual demand for a product is 15,200 units. The weekly demand is 292 units with a standard deviation of 80 units. The cost to place an order is $33.50, and the time from ordering to receipt is two weeks. The annual inventory carrying cost is $0.10 per unit. The reorder point is 730. Suppose the production manager is asked to reduce the safety stock of this item by 45 percent. If she does so, what will the new service probability be? (Use Excel's NORMSDIST() function to find the correct probability for your computed Z-value. Round "z" value to 2 decimal places and final answer to 1 decimal place.) *The answer is not 28% or 42% or 58% or 71% or 86.6% or 90%arrow_forward
- The bookstore at Tech purchases jackets emblazoned withthe school name and logo from a vendor. The vendor sellsthe jackets to the store for $38 apiece. The cost to the bookstore for placing an order is $120, and the annual car-rying cost is 25% of the cost of a jacket. The bookstore manager estimates that 1700 jackets will be sold during theyear. The vendor has offered the bookstore the followingvolume discount schedule: Order Size Discount1–299 0%300–499 2%500–799 4%800 5% What is the bookstore’s optimal order quantity, given thisquantity discount information?arrow_forwardFor one of the quick selling portable smoothie machines (model G), the Long Last Appliance Store needs 1,300 pieces a month and each time a shipment is shipped, it has a set order placement, transportation and delivery costs for $3,000. Each computer costs the corporation $550 and its holding costs are 12 percent. The business has two other smoothie machine versions that are both common with customers. Assess the company's material control strategy whether lots are purchased and separately shipped for each model by deciding the following: The best order size The cycle inventory The volume of orders annually The monthly buying and maintenance costs The average inventory expense Short state reasoning for the strategy (a-e)arrow_forwardThe following data is extracted from the books of Gulf company, Fixed cost OMR 12.000. Selling price OMR.8 per unit and variable cost OMR 2 per unit. How many units will be sold in excess of the breakeven point if Gulf Company wishes to make a profit of OMR 6.000 ? a. 1,000 units b. 2,000 units C. 1.500 units d. 3.000 unitsarrow_forward
- Problem #2Cassorla’s Clothes sells a large number of white dress shirts. The shirts, which bear the store label,are shipped from a manufacturer in New York City. Hy Cassorla, the proprietor, says, “I want to besure that I never run out of dress shirts. I always try to keep at least a two months’ supply instock. When my inventory drops below that level, I order another two-month supply. I’ve beenusing that method for 20 years, and it works.”The shirts cost $6 each and sell for $15 each. The cost of processing an order and receiving newgoods amounts to $80, and it takes three weeks to receive a shipment. Monthly demand isapproximately normally distributed with mean 120 and standard deviation 32. Assume a 20percent annual interest rate for computing the holding cost.a) What value of Q and R is Hy Cassorla sing to control the inventory of white dress shirts?b) What fill rate (Type 2 service level) is being achieved with the current policy?c) Based on a 99 percent fill rate criterion,…arrow_forwardYou are a newsvendor selling the San Pedro Times every morning. Before you get to work, you go to the printer and buy the day’s paper for $0.25 a copy. You sell a copy of the San Pedro Times for $1.00. Daily demand is distributed normally with mean 5 250 and standard deviation 5 50. At the end of each morning, any leftover copies are worthless and they go to a recycle bin. a. How many copies of the San Pedro Times should you buy each morning? b. Based on part (a), what is the probability that you will run out of stock?arrow_forwardThe EastCoasters Bicycle Shop stocks bikes; helmets;clothing; a variety of bike parts including chains, gears,tires, wheels; and biking accessories. The shop is in astorefront location on a busy street and it has very limitedstorage space for inventory. It often runs out of items and isunable to serve customers. To help manage its inventorythe shop would like to classify the stock using the ABCsystem. Following is a list of items the shop stocks and theannual demand and unit value for each:Classify the inventory items according to the ABC ap-proach using dollar value of annual demand.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,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY