1.
You are the operations manager of a firm that uses the continuous-review inventory
control system. Suppose the firm operates 52 weeks a year, 365 days, and has the
following characteristics for its primary item:
A normal distribution table is shown below.
Use the information in Table 12.4. What is the economic order quantity for this item?
You are the operations manager of a firm that uses the continuous-review inventory
control system. Suppose the firm operates 52 weeks a year, 365 days, and has the
following characteristics for its primary item:
A normal distribution table is shown below.
Use the information in Table 12.4. What is the length of their order cycle if they order the
economic order quantity each time?
2. You are the operations manager of a firm that uses the continuous-review inventory
control system. Suppose the firm operates 52 weeks a year, 365 days, and has the
following characteristics for its primary item:
A normal distribution table is shown below.
Use the information in Table 12.4. What is the reorder point for this item if they use a
95% service level?
3. You are the operations manager of a firm that uses the continuous-review inventory
control system. Suppose the firm operates 52 weeks a year, 365 days, and has the
following characteristics for its primary item:
A normal distribution table is shown below.
4. Use the information in Table 12.4. If this form uses an EOQ model for purchase
decisions, which change would result in the biggest increase in order quantity over the
amount required by the original data?
Peterson Enterprises uses a continuous review inventory control system. The firm
operates 50 weeks per year and has the following characteristics for an item:
A normal distribution table is shown below.
Use the information in Table 12.5. What is the EOQ for this item?
4. Cynthia Korinsky, manager of a large medical supply house that operates 50 weeks per
year and five days per week, has decided to implement a periodic review system for all
class A items. One such item has the following characteristics:
Demand = 10,000 units per year (or 40 units per workday)
Order cost = $50 per order
Holding cost = $5 per unit per year
If Korinsky wishes to minimize total cost (thereby approximating the EOQ), what should
be P, the number of workdays between orders?
5.
Use the information in Table 12.6. The firm decided to change to the periodic review
system to control the item's inventory. For the most recent review, an inventory clerk
checked the inventory of this item and found 500 units. There were no scheduled receipts
at the time. How many units should be ordered? (HINT: Use the EOQ model to derive P,
the time between reviews.)
6.
A normal distribution table is shown below.
Use the information in Table 12.7. A firm uses the periodic review system to control the
item depicted above. It reviews the item's status every three weeks (P = 3). At the most
recent inventory review, an inventory clerk found 1,500 units. There were no scheduled
receipts and no backorders. How many units should be ordered? (Hint: You must
calculate T before answering this question.)
7.
A normal distribution table is shown below.
Use the information in Table 12.7. What is the EOQ for this item?
Answer
Between 1 and 1,500 units
Between 1,501 and 3,000 units
Between 3,001 and 4,500 units
Greater than 4,500 units
Jerry Allison is in charge of production for a small producer of plumbing supplies. The
cricket model has an estimated annual demand of 12,000 units and can be produced at a
production rate of 90 units per day. The company produces (and sells) the cricket 300
days per year. Setup cost to produce this model averages $22 and the item has a holding
cost of $3 per unit per year.
Use the information in Scenario D.1. What is the economic production lot size (ELS)?
Answer
Fewer than or equal to 400 units
Greater than 400 units but fewer than or equal to 480 units
Greater than 480 units but fewer than or equal to 500 units
Greater than 500 units
Jerry Allison is in charge of production for a small producer of plumbing supplies. The
cricket model has an estimated annual demand of 12,000 units and can be produced at a
production rate of 90 units per day. The company produces (and sells) the cricket 300
days per year. Setup cost to produce this model averages $22 and the item has a holding
cost of $3 per unit per year.
Use the information in Scenario D.1. If Jerry chooses to produce batches dictated by the
economic production lot size (ELS) model, how many days elapse between the start of
consecutive production runs (what is the time between runs or TBO)?
Answer
Fewer than or equal to 8 days
Greater than 8 days but fewer than or equal to 10 days
Greater than 10 days but fewer than or equal to 12 days
Greater than 12 days
Jerry Allison is in charge of production for a small producer of plumbing supplies. The
cricket model has an estimated annual demand of 12,000 units and can be produced at a
production rate of 90 units per day. The company produces (and sells) the cricket 300
days per year. Setup cost to produce this model averages $22 and the item has a holding
cost of $3 per unit per year.
Use the information in Scenario D.1. If Jerry chooses to produce the batch size suggested
by the economic production lot size (ELS) model, what is the annual cost?
Answer
Less than or equal to $900
Greater than $900 but less than or equal to $950
Greater than $950 but less than or equal to $1000
Greater than $1000
In a noninstantaneous replenishment model, as the daily demand approaches the daily
production rate:
Answer
the number of production runs per year decreases.
the length in days of a production run increases.
the economic lot size increases.
the time between production runs decreases.
Which one of the following statements about quantity discounts is best?
Answer
The minimum cost point on each price curve is always feasible.
A price break is the maximum quantity needed to get a discount.
If the EOQ for the lowest price is feasible, this is the best lot size.
Either price or quantity is sufficient for the search for the best lot size.
Kyle store sells K2 skis. The store makes a $200 profit per unit sold during the ski
season, but it should take a $50 loss per unit if sold after the season is over. The
following discrete probability distribution has been estimated for the season's demand.
Use the information in Scenario D.2. What is the payoff with an order quantity (Q) of 40
units if the demand (D) is 30 units?
Answer
Less than or equal to $2,000
Greater than $2,000 but less than or equal to $4,000
Greater than $4,000 but less than or equal to $6,000
Greater than $6,000
Consider an item with the following discrete demand distribution for a one-time
inventory decision.
This item experiences a seasonal demand pattern. A profit of $15 per unit is made if the
item is sold in season, but a loss of $10 per unit is incurred if sold after the season is over.
Use the information in Scenario D.3. What is the payoff when 40 units are ordered but a
demand of 50 materializes?
Answer
$150
$300
$450
$600
Consider an item with the following discrete demand distribution for a one-time
inventory decision.
This item experiences a seasonal demand pattern. A profit of $15 per unit is made if the
item is sold in season, but a loss of $10 per unit is incurred if sold after the season is over.
Use the information in Scenario D.3. What is the order quantity with the highest expected
payoff?
Answer
20 units
30 units
40 units
50 units
Which of these statements about the one-period model is best?
Answer
Purchasing a quantity with the highest expected payoff will result in a positive
payoff regardless of demand during the period.
The loss per unit cannot exceed the profit per unit.
If demand exceeds the purchased quantity then the payoff exceeds the expected
payoff.
The expected payoff is always less than the actual payoff.
Consider a noninstantaneous replenishment situation in which the production rate is 100
units per day, the demand rate is four units per day, and the economic production lot size
is 500 units. Which of the following statements is true?
Answer
The average cycle inventory is fewer than 225 units.
The average cycle inventory is greater than 300 units.
The rate of buildup in cycle inventory during the production cycle is fewer than 100
units per day.
The rate of buildup in cycle inventory during the production cycle is greater than or
equal to 400 units per day.