Practical Management Science
5th Edition
ISBN: 9781305250901
Author: Wayne L. Winston, S. Christian Albright
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 12.4, Problem 3P
Summary Introduction
To calculate: The optimal order quantity with this assumption.
Inventory and supply chain models:
The functions of inventory and supply chain are one of the most important business decision areas for an organization. The first important aspect of these concepts is to have adequate inventory on hand. The second important aspect is to carry a little amount of inventory as possible.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A manufacturer procures a subassembly from a supplier. The annual demand is 145,000 units, the cost per unit is $4, the inventory-carrying charge is 12 percent, and the order cost is $225. For orders between 10,000 but less than 30,000, a five percent discount is applied, and for orders exceeding 30,000, a eight percent discount is applied.
What is the optimal order quantity?
Use the Quantity Discount Excel template to find your answer.
You would like to use the fixed-time period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 10 days and the number of days between reviews is 15. Which of the following is the standard deviation of demand over the review and lead time period if the standard deviation of daily demand is 10?
-25
-40
-50
-73
-100
A company stocks an item at 0.5 pesos per item per day. The item is consumed at the
rate of 150 items per day. Setting up an order costs 75 pesos. Suppose shortage is not
allowed.
(a) What is the optimal inventory policy? What is the total inventory cost incurred
by the company with this policy?
(b) How much will the company save with this new policy if the original policy of the
company is ordering 150 items per day?
(c) If there is a 5-day lead time between placing and arrival of orders, what will be the
optimal inventory policy?
Chapter 12 Solutions
Practical Management Science
Ch. 12.4 - Prob. 1PCh. 12.4 - Prob. 2PCh. 12.4 - Prob. 3PCh. 12.4 - Prob. 4PCh. 12.4 - Prob. 5PCh. 12.4 - Prob. 6PCh. 12.4 - Prob. 7PCh. 12.4 - Prob. 8PCh. 12.4 - Prob. 9PCh. 12.4 - Prob. 10P
Ch. 12.4 - Prob. 11PCh. 12.5 - Prob. 12PCh. 12.5 - Prob. 13PCh. 12.5 - Prob. 14PCh. 12.5 - Prob. 15PCh. 12.5 - Prob. 16PCh. 12.5 - Prob. 17PCh. 12.5 - Prob. 18PCh. 12.5 - Prob. 19PCh. 12.5 - Prob. 20PCh. 12.5 - Prob. 21PCh. 12 - Prob. 27PCh. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 42PCh. 12 - Prob. 43PCh. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Prob. 48PCh. 12 - Prob. 49PCh. 12 - Prob. 53PCh. 12 - Prob. 54PCh. 12 - In terms of K, D, and h, what is the average...Ch. 12 - Prob. 56PCh. 12 - Prob. 57PCh. 12 - Prob. 58PCh. 12 - Prob. 59PCh. 12 - Prob. 60PCh. 12 - Prob. 61PCh. 12 - Prob. 62PCh. 12 - Prob. 63PCh. 12 - Prob. 64PCh. 12 - Prob. 65PCh. 12 - Prob. 66PCh. 12 - Prob. 67PCh. 12 - Prob. 68PCh. 12 - Prob. 69PCh. 12 - Prob. 70PCh. 12 - Prob. 71PCh. 12 - Prob. 1.1CCh. 12 - Prob. 1.2CCh. 12 - Prob. 1.3C
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
- Models of inventory systems frequently consider the relationships among a beginning inventory,a production quantity, a demand or sales, and an ending inventory. For a givenproduction period j, letsj-1 = ending inventory from the previous period (beginning inventory for period j)xj = production quantity in period jdj = demand in period jsj = ending inventory for period ja. Write the mathematical relationship or model that shows ending inventory as a functionof beginning inventory, production, and demand.b. What constraint should be added if production capacity for period j is given by Cj?c. What constraint should be added if inventory requirements for period j mandate anending inventory of at least Ij?arrow_forwardRed Corporation uses the reorder point modelto plan its purchases. It sellsitssole productat the following daily amounts:Minimum=30,000; Average=40,000;Maximum=60,000. Its supplier takes 3 dayson average and 4 days maximum to deliverthe order. The-reorder point would be A. 240,000B. 160,000C. 120,000D. 90,000arrow_forwardRed Corporation uses the reorder point model to plan its purchases. It sells its sole product at the following daily amounts: Minimum=30,000; Average=40,000; Maximum=60,000. Its supplier takes 3 days on average and 4 days maximum to deliver the order. The-reorder point would be: A. 240,000B. 160,000C. 120,000D. 90,000arrow_forward
- A manufacturing plant procures 100,000 filters per year. Each unit has a fixed order cost is $50. To maintain the inventory in optimal conditions, there is a carrying cost rate of 10% per year. The vendor of filters has offered the following price breaks: for orders of more than 5,000 filters, cost is $4.50/unit; for orders between 1,000 and 5,000 filters, cost is $4.75/unit; orders less than 1,000 filters have a cost of $5.00/unit. Find the economic order quantity. Calculate the average annual cost for the optimal solution.arrow_forwardKickBites Manufacturing has a demand for 1,000 pumps each year. The cost of a pump is $50. It cost KickBites Manufacturing $40 to place an order, and the carrying cost is 25% of the unit cost. If pumps are ordered in quantities of between 200 and 250, KickBites Manufacturing can get a discount on the cost of the pumps. Should the company order 200 pumps or 250 pumps at a time and take the 3% discount? [Provide your answers in two decimal points]arrow_forwardMAY I ASK FOR THE SOLUTIONS AND ANSWERS OF NO. 12 to 17 (kindly refer to the table and the problem above it) Thank you! ABC Corporation resells one type of candle. It has 250 working days. Each day, it sells an average of 500 boxes but may sometimes sell a maximum of 600 boxes. The supplier takes an average of 5 days to deliver the order. During busier times, the supplier may take 7 days. Based on ABC’s records, ordering cost average P400 per order. Storage cost per box average P5 per year. There is also an opportunity cost of 1% per year for every peso invested in inventories. Each box of candles costs P450. If ABC would continue its current inventory management policy, it would keep 10,000 boxes as safety stock and order tendays-worth of inventory. (A) Reorder Point 1. What should be the reorder point in boxes? 2. How much would the normal lead time usage be? 3. How much should ABC keep as safety stock? (B) Economic Order Quantity 4. What is the annual demand for the boxes of…arrow_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_forwardThe owner and manager of a hardware store reevaluates his inventory policy for hammers. sells an average of 50 hammers a month, so you have placed purchase orders for 50 hammers with a distributor at a cost of $20 each at the end of each month. But the owner does not place all the store orders and find that this takes much of your time. He estimates that the value of his time spent ordering hammers is $75. a) What must be the unit cost of maintaining hammers for the current policy of the hardware store to be Optimal according to the EOQ model? b) If the distributor delivers an order for hammers in 5 business days (out of an average of 25 per month), what should be the reorder point, according to the EOQ model?arrow_forwardA manufacturing company uses 25,000 components at an even rate during a year. Eachorder placed with the supplier of the components is for 2,000 components, which is theeconomic order quantity. The company holds a buffer inventory of 500 components. Theannual cost of holding one component in inventory is $2.What is the total annual cost of holding inventory of the component?arrow_forward
- 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_forwardA food processor purchases corn for use in its products. The firm uses 700 pounds of corn per week and purchases corn for $0.45 per pound from a supplier. The cost to hold one pound of corn in inventory for one year is $0.09. Each time the firm orders corn from the supplier, the firm must pay a $48 order processing charge. Assume there are 52 weeks in a year and round your answer to the nearest integer value. What is the optimal order quantity (in pounds)? poundsarrow_forwardSuppose the following item is being managed using a fixed-order quantity model with safety stock. Annual Demand = 100,000 units Order quantity = 30,000 units Safety stock = 4000 units What are the average inventory level and inventory turnover for this item?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,
Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
Production and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.