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Exam 12: Inventory Management

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Question 51

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The EOQ model with quantity discounts attempts to determine

A) what is the lowest amount of inventory necessary to satisfy a certain service level.
B) what is the lowest purchasing price.
C) whether to use fixed-quantity or fixed-period order policy.
D) how many units should be ordered.
E) what is the shortest lead time.

F) A) and B)
G) C) and D)

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Question 52

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Holstein Computing manufactures an inexpensive audio card (Audio Max)for assembly into several models of its microcomputers.The annual demand for this part is 100,000 units.The annual inventory carrying cost is $5 per unit and the cost of preparing an order and making production setup for the order is $750.The company operates 250 days per year.The machine used to manufacture this part has a production rate of 2000 units per day. a.Calculate the optimum lot size. b.How many lots are produced in a year? c.What is the average inventory for Audio Max? d.What is the annual cost of preparing the orders and making the setups for Audio Max?

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Question 53

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Describe ABC inventory analysis in one sentence.What are some policies that may be based upon the results of an ABC analysis?

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days.Demand during this period averages 100 units per day.What would be an appropriate re-order point?

The annual demand,ordering cost,and the inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

If setup costs are reduced by substantial reductions in setup time,the production order quantity is also reduced.

The primary purpose of the basic economic order quantity model shown below is Q∗ =

Demand for a product is relatively constant at five units per day.Lead time for this product is normally distributed with a mean of ten days and a standard deviation of three days. a.What reorder point provides a 50% service level? b.What reorder point provides a 90% service level? c.If the lead time standard deviation can be reduced from 3 days to 1,what reorder point now provides 90% service? How much is safety stock reduced by this change?

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10.The revised EOQ is

________ is the complement of the probability of a stockout.

________ is extra stock that is carried to serve as a buffer.

A product has variable demand and constant lead time.Currently this product is managed by a fixed-period inventory system,for which the review period is one week.Lead time is four weeks.Annually about 5,200 units of this product are sold.The current target inventory is 500 units.Today is review day;75 units are on the shelves,and orders placed at previous reviews in the amount of 110,60,and 30 have not yet been received.There are no backorders. a.How much is the firm allowing for safety stock in this case? b.What should be the order amount this week?

Which of the following statements regarding the production order quantity model is true?

A product has demand of 4000 units per year.Ordering cost is $20 and holding cost is $4 per unit per year.The EOQ model is appropriate.The cost-minimizing solution for this product will cost ________ per year in total annual inventory costs.

________ is the time between placement and receipt of an order.

Which of the following is not an assumption of the economic order quantity model shown below? Q∗ =

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car.Paper sales are normally distributed,with a mean of 100 and standard deviation of 10.He sells papers for $.5 and pays $.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?

ABC analysis is based upon the principle that

In some inventory models,the optimal behaviour occurs where ordering costs and carrying costs are equal to one another.Provide an example of a model where this "rule" does not hold;explain how the model's results are optimal anyway.

Which of the following statements regarding control of service inventories is true?