Operations Management
17th Edition
ISBN: 9781259142208
Author: CACHON, Gérard, Terwiesch, Christian
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 3PA
Summary Introduction
To determine: The annual inventory turns.
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Annual demand 2,400 units Unit price (`) 2.40 Ordering cost (`) 4.00 Storage cost 2% p.a. Interest rate 10% p.a. Lead time ½ month Calculate EOQ, reorder level and total annual inventory cost. How much does the total inventory cost vary if the unit price is changed to $ 5?
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At Matthews Car Repair, customer demand for a certain brand of motor oil is normally distributed with a mean of 15 gallons and a standard deviation of 6 work-days. To be 95% sure that Compact Car Repair will not run out of oil, we should reorder when motor oil in stock is less than _______ gallons.
a. 24.9
b. 22.6
c. 23.7
d. 20
QUESTIONS 1-6.
Suppose the ABC Snack Company sells a Potato Chip product that has a constant annual demand
rate of 3,600 bags of chips. Each bag costs ABC $3.00, and each order costs $20.00. Holding
costs are 25% of the value of inventory. ABC has 250 working days per year, and the lead time
is 5 days. Identify the following aspects of inventory policy.
(b)
(c)
Question 2. What is the reorder point (in days)?
Question 3. How long is the cvcle time (T, in days)?
Chapter 10 Solutions
Operations Management
Ch. 10 - It is costly to hold inventory, but inventory can...Ch. 10 - A delivery truck from a food wholesaler has just...Ch. 10 - Prob. 3CQCh. 10 - Prob. 4CQCh. 10 - Prob. 5CQCh. 10 - Prob. 6CQCh. 10 - Prob. 7CQCh. 10 - Prob. 8CQCh. 10 - Prob. 9CQCh. 10 - Prob. 10CQ
Ch. 10 - Prob. 11CQCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Prob. 3PACh. 10 - An electronics manufacturer has 25 days-of-supply...Ch. 10 - Prob. 5PACh. 10 - Prob. 6PACh. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - An online shoe retailers annual cost of holding...Ch. 10 - Prob. 10PACh. 10 - Prob. 11PACh. 10 - Prob. 12PACh. 10 - Prob. 13PACh. 10 - Prob. 14PACh. 10 - Prob. 15PACh. 10 - Prob. 16PACh. 10 - A retailer has annual sales of 500,000 and an...Ch. 10 - Prob. 18PACh. 10 - Prob. 19PACh. 10 - Prob. 1CCh. 10 - Prob. 3CCh. 10 - Prob. 4C
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- The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardI 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_forwardGiven Information Service Level - 95% (z value= 1.6649) Order Cost - $125Order Cycle (weeks) - 4, 5, 6, 7, 8Lead Time (weeks) - 2 weeksOperating Time - 52 weeks Standard deviation = 69.3237 Variable Holding Cost - 12.019% Fixed Holding Cost - 1,659,317.307 QUESTION: Compute for annual variable holding cost. Formula Given: (EOQ/2) x (Unit cost x Percentage Value of Inventory)arrow_forward
- 10 Use the information presented in the graph to answer the following questions: Annual Cost C3 C2 Q1 You are also given the following information: Q1 =450 .Q2 = 700 C1 = 350 C2 = 750 1300 Q2 Order Quantity Which annual inventory cost component does the blue line represent? Total cost Which annual inventory cost component does the green line represent? Holding cost What is the Economic Order Quantity (EQ9) based on th Which annual inventory cost component does the red line represent? Ordering cost 220arrow_forwardGreen Grass Industries Limited (GGIL) has used a fixed-time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs, are forcing GGIL, to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such a shortage costs. Table 10 is a random sample of 20 GGIL's items. Table 10. Annual Usage by Value of a sample of GGIL's Inventory Item Number Annual Usage ($) Item Number Annual Usage ($) 1 10,600 11 2,750 2 14,000 12 1,400 3 4,000 13 3,200 4 16,000 14 2,500 5 8,100 15 110,000 1,800 16 14,800 7 84,000 17 9,500 8. 890 18 1,700 9 940 19 3,700 10 94,000 20 12,500 a) What would you recommend GGIL to do to cut back its labor cost? (Illustrate using an ABC plan). b) Item 18 is critical to continued operations at GGIL. i. How would you recommend it be classified? ii. Give the reason(s) for your answer.arrow_forwardEOQ for Production Lots ExerciseA Power Company buys coal from a Coal mine togenerate electricity in rural areas. The Coal minecan supply coal at the rate of 3,500 tons per day for$10.50 per ton. The Power Company uses the coalat a rate of 800 tons per day and operates 365 daysper year. The annual carrying cost for coal is 20%of the acquisition cost, and the ordering cost is$5,000.a) What is the economical production lot size?b) What is the Power Company’s maximuminventory level for coal?arrow_forward
- Do you think the safety stock (safety inventory) could be negative? What is the meaning of a negative safety inventory (hint: safety stock is the difference between the optimal inventory and the average demand)?arrow_forwardThomas Kratzer is the purchasing manager for theheadquarters of a large insurance company chain with a centralinventory operation. Thomas’s fastest-moving inventory item hasa demand of 6,000 units per year. The cost of each unit is $100, and the inventory carrying cost is $10 per unit per year. The aver-age ordering cost is $30 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 120 units. (This is acorporate operation, and there are 250 working days per year.)a) What is the EOQ?b) What is the average inventory if the EOQ is used?c) What is the optimal number of orders per year?d) What is the optimal number of days in between any two orders?e) What is the annual cost of ordering and holding inventory?f ) What is the total annual inventory cost, including the cost ofthe 6,000 units?arrow_forwardAcademic) s Management Fall20 Al Khaleej Inc. needs 440 kgs of a material per month. It costs RO 100 to make and receive an order, and it takes 12 workdays to receive it. The annual holding cost is 15 % of purchase price. The price RO 2 per kg. The company is operating 6 workdays per week in a 52-week year. What is the expected time (in weeks) between order? Round-up to the nearest integer Select one: O a. 185 O b. None is correct O c. 105 O d. 111 O e, 207arrow_forward
- Select the best answer for the question. 2. The carrying cost for inventory consists of which cost components? A. Obsolescence cost, storage cost, and capital cost O B. Capital cost, obsolescence cost, and ordering cost C. Storage cost, handling cost, and obsolescence cost D. Obsolescence cost, capital cost, and stockout cost OO 0.0 Mark for review (Will be highlighted on the review page) >>arrow_forwardThompson Paint Company uses 60,000 gallons of pigment per year. The cost of ordering pigment is $200 per order, and the cost of carrying the pigment in inventory is $1 per gallon per year. The firm uses pigment at a constant rate every day throughout the year. a. Calculate the EOQ. b. If it takes 20 days to receive an order once it has been placed, determine the reorder point in terms of gallons of pigment. (Note: Use a 365-day year.)arrow_forwardDiscount-Mart, a major East Coast retailer, wants todetermine the economic order quantity (see Chapter 12 for EOQformulas) for its halogen lamps. It currently buys all halogenlamps from Specialty Lighting Manufacturers in Atlanta. Annualdemand is 2,000 lamps, ordering cost per order is $30, and annualcarrying cost per lamp is $12. a) What is the EOQ?b) What are the total annual costs of holding and ordering(managing) this inventory?c) How many orders should Discount-Mart place with SpecialtyLighting per year?arrow_forward
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