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Exam 12: Inventory Management

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Question 31

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What is the difference between P and Q inventory systems?

A) order size
B) order spacing
C) maximum service level
D) lead time length
E) A and B

F) All of the above
G) A) and C)

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Question 32

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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 holding and setup cost for Audio Max?

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(a)Q*p = = = 6123.7 or 6124 units.
(b)...

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Question 33

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Which of these statements about the production order quantity model is FALSE?

For a certain item,the cost-minimizing order quantity obtained with the basic EOQ model is 200 units,and the total annual inventory (carrying and setup) cost is $600.What is the inventory carrying cost per unit per year for this item?

Huckaby Motor Services,Inc.rebuilds small electrical items such as motors,alternators,and transformers,all using a certain type of copper wire.The firm's demand for this wire is approximately normal,averaging 20 spools per week,with a standard deviation of 6 spools per week.Cost per spool is $24;ordering costs are $25 per order;inventory handling cost is $4.00 per spool per year.Acquisition lead time is four weeks.The company works 50,5-day weeks per year. a.What is the optimal size of an order,if minimization of inventory system cost is the objective? b.What are the safety stock and reorder point if the desired service level is 90%?

What are the assumptions of the EOQ model?

The annual demand for an item is 10,000 units.The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. (a)What is the optimal order quantity,given the following price breaks for purchasing the item? (b)What price should the firm pay per unit? (c)What is the total annual cost at the optimal behavior?

A toy manufacturer makes its own wind-up motors,which are then put into its toys.While the toy manufacturing process is continuous,the motors are intermittent flow.Data on the manufacture of the motors appears below. Annual demand (D)= 50,000 units Daily subassembly production rate = 1,000 Setup cost (S)= $85 per batch Daily subassembly usage rate = 200 Carrying cost = $.20 per unit per year (a)To minimize cost,how large should each batch of subassemblies be? (b)Approximately how many days are required to produce a batch? (c)How long is a complete cycle? (d)What is the average inventory for this problem? (e)What is the total annual inventory cost (holding plus setup)of the optimal behavior in this problem?

In the EOQ model,for a given level of demand,annual holding cost is larger as the order quantity is ________.

An inventory decision rule states,"When the inventory level goes down to 14 gearboxes,100 gearboxes will be ordered." Which of the following statements is TRUE?

Which of the following is NOT one of the four main types of inventory?

A(n)________ system triggers inventory ordering on a uniform time frequency.

Perform an ABC analysis on the following set of products.

ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

ABC analysis divides on-hand inventory into three classes,generally based upon which of the following?

A firm that makes electronic circuits has been ordering a certain raw material 250 ounces at a time.The firm estimates that carrying cost is I = 30% per year,and that ordering cost is about $20 per order.The current price of the ingredient is $200 per ounce.The assumptions of the basic EOQ model are thought to apply.For what value of annual demand is their action optimal?

Several inventory models assume "independent demand." Explain what that term means and why the assumption is important.

In the quantity discount model,the cost of acquiring goods (product cost)is not a factor in determining lot size.

Safety stock in inventory systems depends only on the average demand during the lead time.

A bakery wants to determine how many trays of doughnuts it should prepare each day.Demand is normal with a mean of 5 trays and standard deviation of 1 tray.If the owner wants a service level of at least 95%,how many trays should he prepare (rounded to the nearest whole tray) ? Assume doughnuts have no salvage value after the day is complete.