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Exam 12: Inventory Management

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Question 51

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What are the assumptions of the EOQ model?

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The more important assumptions of the ba...

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Question 52

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Describe the costs associated with ordering and maintaining inventory.

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Costs that are associated with ordering ...

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Question 53

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In the basic economic order quantity model and in the production order quantity model, optimal behavior occurs where annual setup costs equal annual holding costs. Is this a coincidence, or a fundamental element of these models? Answer in a well-constructed paragraph.

__________ is a method for dividing on-hand inventory into three classifications based on annual dollar volume.

Holding costs are $35 per unit per year, the ordering cost is $120 per order, and sales are relatively constant at 300 per month. What is the optimal order quantity? What are the annual inventory management costs?

Milk is stocked at the grocery store each week. At the end of the week unsold milk is reduced in price by 70% and always sells for this lower price instantly. If demand for milk is normal with a mean of 200 gallons and standard deviation of 25 gallons, find the price a fresh gallon of milk sells for. Assume a service level of 95% and that the store purchases milk for $2 per gallon.

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Which products do you suggest the firm keep the tightest control over? Explain.

Consider a product with a daily demand of 400 units, a setup cost per production run of $100, a monthly holding cost per unit of $2.00, and an annual production rate of 292,000 units. The firm operates and experiences demand 365 days per year. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model. How much money per year has that mistake cost the company?

Amazon's original concept of operating without inventory has given way to a model in which Amazon is a world-class leader in __________.

The inventory management costs for a certain product are S=$8 to order, and H=$1 to hold for a year. Annual demand is 2400 units. Consider the following ordering plans: (a) order all 2400 at one time, (b) order 600 once each quarter, and (c) order 200 once each month. Calculate the annual costs associated with each plan. Plot these values. Is there another plan, cheaper than any of these? Calculate this, and plot it (plot at least five points) on the grid below. Label your graph carefully.

If demand is not uniform and constant, then stockout risks can be controlled by

Which of the following is an element of inventory holding costs?

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

In the simple EOQ model, if annual demand were to increase, the EOQ would increase proportionately.

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

The reorder point is the inventory level at which action is taken to replenish the stocked item.

In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

Which of the following should be higher in P systems than Q?

When quantity discounts are allowed, the cost-minimizing order quantity

Service level is the complement of the probability of a stockout.