a) Hosulton is a well known corporate incentives and awards manufacturer in Ontario. Hoselton mass produces blanks and then customizes the blanks for the company and nature of the incentive or award. Hosulton offers three different materials. The most expensive and profitable is sterling silver, the next is wood, and the third is sales for plastic. Hosulton usually has on hand 7,000 blanks as some organizations will order hundreds of items at a time for large events such as a golf tournament where each participant receives a memento.The company uses and ABC inventory classification system. 8% of the items are sterling silver. 35% are wood. The remaining are plastic. The operations manager of Hosulton would like the inventory counted regularly for audit and control purposes. She would like to count the items as follows: Sterling silver monthly, wood quarterly, and plastic semi-annually. She uses 20 working days per month in her inventory calculations.

a) Calculate the daily count of items by applying the cycle counting method.

b) OCB Inc specializes in selling fair trade organic coffee beans in 1 lb bags. The bags are kept in a cool dry room. The holding cost for each bag is $1.40. The cost to place an order with the various suppliers works out to $35. The lead time is 5 days and OCB sells 7,000 bags of coffee per year to its customers. OCB uses 250 working days per year in its operations.

i) What is the optimal order quantity (EOQ)?

ii) What is the average inventory? Hint: Use the EOQ calculated in i).

iii) What is the annual inventory holding cost?

iv) How many orders would be placed each year?

v) What is the annual ordering cost?

vi) What is the total annual cost to manage the inventory?

vii) How many days on average are there between orders?

viii) What is ROP?