Concept explainers
(a)
Interpretation: The number of pies required for each production run is to be calculated along with the annual cost of setup and the holding cost of the pies.
Concept Introduction:
Economic order quantity (EOQ) refers to the ideal order quantity that an organization should buy to minimize inventory costs such as ordering costs, holding costs, and shortage costs.
(b)
Interpretation: The total optimal number of pies that should be baked each time in the new oven is to be calculated.
Concept Introduction:
Inventory management is nothing but the holding, ordering, and utilizing the organization’s inventory. This includes the management of the organization’s resources, raw material, components, and finished goods.
(c)
Interpretation: The number of years will it require for the new oven to pay for itself is to be calculated when the cost of the new oven is $350.
Concept Introduction:
Inventory management is nothing but the holding, ordering, and utilizing the organization’s inventory. This includes the management of the organization’s resources, raw material, components, and finished goods.
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Production and Operations Analysis, Seventh Edition
- The daily demand for printer paper at the School of Business is approximately normal with a mean of 15.2 boxes and a standard deviation of 1.6 per day. The Administrative Assistant reviews the inventory every 30 days, and the lead time is 5 days. The division set a policy of satisfying 96% of the demand for paper. If there are 125 boxes of printer paper in inventory at the beginning of this review period, how many boxes of printer paper should be ordered? What is the variance of demand during the review period plus the lead-time period? What is the standard deviation of demand during the review period plus the lead-time period? A. Variance = 76.80 Standard deviation = 8.76 B. Variance = 89.60 Standard deviation = 9.47 C. Variance = 9.47 Standard deviation = 89.60 D. Variance = 12.8 Standard deviation = 3.58arrow_forwardItem X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How many units of Item X should be ordered each time? When should Item X be ordered? How much would be Item X's total annual purchasing cost? How much would be Item X's total annual procurement cost? Including its total annual purchasing cost, how much would be Item X's total annual inventory cost? What is Item X's average inventory level? How much would be Item X's total annual storage cost? How much would be Item X's total annual stockout cost? How many times per year would Item X be ordered?arrow_forwardFlemming Accessories produces paper slicers used in offices and in art stores. The minislicer has been one of its most popular items: Annual demand is 6,750 units and is constant throughout the year. Kristen Flemming, owner of the firm, produces the minislicers in batches. On average, Kristen can manufacture 125 minislicers per day. Demand for these slicers during the production process is 30 per day. The setup cost for the equipment necessary to produce the minislicers is $150. Carrying costs are $1 per minislicer per year. How many minislicers should Kristen manufacture in each batch?arrow_forward
- Tasty Beverage Co. produces soft drinks, specializing in fruit drinks. Tasty produces 5,000 cans ofproduct per batch. Setup cost for each batch is $50 and each drink costs $0.10 to produce. What is thetotal cost per batch? How much would it cost to fill an order for 100,000 cans?arrow_forwardThe materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If the order size was 1,000 kilograms of resin, what would be the average inventory level?arrow_forwardJohnson Peters holds the position of operations manager for a small container and bottle manufacturing company. His job description includes managing inventory levels, supervision of operation, leading his team etc. Annually there is usually a quick turn over of inventory items. One of the main items (bottle caps) have a demand of 8,000 units per day. The actual cost of each unit is $150, and the inventory holding cost per years is 15% of the unit price. The average setup cost is $17.85. There are 300 working days per year, and it takes an order about 5 days to arrive by boat. D.What is the optimal number of days in between any two orders?E.What is the annual cost of ordering?F.What is the annual cost of holding inventory? PLEASE DO NOT WRITE RESPONSES IT IS HARD TO UNDERSTANDarrow_forward
- Johnson Peters holds the position of operations manager for a small container and bottle manufacturing company. His job description includes managing inventory levels, supervision of operation, leading his team etc. Annually there is usually a quick turn over of inventory items. One of the main items (bottle caps) have a demand of 8,000 units per day. The actual cost of each unit is $150, and the inventory holding cost per years is 15% of the unit price. The average setup cost is $17.85. There are 300 working days per year, and it takes an order about 5 days to arrive by boat. G.Including the cost of the 8,000 units. What is the annual cost of the inventory? H.What is the total annual cost? I. What is the re-order point? PLEASE DO NOT WRITE RESPONSES ITIS TOO HARD TO UNDERSTANDarrow_forwardJohnson Peters holds the position of operations manager for a small container and bottle manufacturing company. His job description includes managing inventory levels, supervision of operation, leading his team etc. Annually there is usually a quick turn over of inventory items. One of the main items (bottle caps) have a demand of 8,000 units per day. The actual cost of each unit is $150, and the inventory holding cost per years is 15% of the unit price. The average setup cost is $17.85. There are 300 working days per year, and it takes an order about 5 days to arrive by boat. A.What is the Economic Order Quantity? B.What is the average inventory if the Economic Order Quantity is used? C. What is the optimal number of orders per year?arrow_forward6. Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 17,000 units per year. It costs Leaky Pipe $5 to process an order to replenish stock and $2.00 per unit per year to carry the item in stock. Stock is received 12 working days after an order is placed. No backordering is allowed. Assume 365 working days a year. a. Leaky Pipe's optimal order quantity is ______ units. (Enter your response rounded to the nearest whole number.) Part 3 b. The optimal number of orders per year is _____ orders. (Enter your response rounded to the nearest whole number.) Part 4 c. The optimal interval (in working days) between orders is ______ days. (Enter your response rounded to one decimal place.)arrow_forward
- XYZ company has determined that the annual demand for type A material is 20,000 pounds. Salma, who works in her brother's factory, is in charge of purchasing. She estimates that it costs $15 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one pound in inventory for a year is 0.05 $. Assume that the demand is constant throughout the year. (Note: $ is a dollar sign) a) If we are going to use the EOQ inventory model, mention all the assumptions that are made to validate that model. b) How many pounds of type A material should Huda order (i.e. Q*) at a time if she wishes to minimize total inventory cost? c) How many orders per year would be placed? d) What would the annual ordering cost be? e) What would the average inventory be? f) What would the annual holding cost be? See equations below if needed: Annual Ordering cost Annual hdding: Number of orders placed per…arrow_forwardXYZ company has determined that the annual demand for type A material is 20,000 pounds. Salma, who works in her brother's factory, is in charge of purchasing. She estimates that it costs $15 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one pound in inventory for a year is 0.05 $. Assume that the demand is constant throughout the year. (Note: $ is a dollar sign) d) What would the annual ordering cost be? e) What would the average inventory be? f) What would the annual holding cost be? See equations below if needed: Number of orders placed per year Annual Ordering cost Annual hdding= Annual demand Number of units in each order Average inventory Ordering cost per order Ordering cost per order (Carrying cost per unit = b.carrow_forwardA part is produced in lots of 1,400 units. It is assembled from 2 components worth $30 total. The value added in production (for labor and variable overhead) is $30 per unit, bringing total costs per completed unit to $60. The average lead time for the part is 5 weeks and annual demand is 4,100 units, based on 50 business weeks per year. How many units of the part are held, on average, in cycle inventory? _______________________units. (Enter your response as an integer.) What is the dollar value of this inventory? $________________________(Enter your response as an integer.) How many units of the part are held, on average, in pipeline inventory? ________________________________units. (Enter your response as an integer.) What is the dollar value of this inventory? $________________________ (Enter your response as an integer.) (Hint: Assume that the typical part in pipeline inventory is 50 percent completed. Thus, half the labor and variable overhead cost…arrow_forward
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