Inventory Management Assignment Description 1. A part is produced in lots of 1,000 units. It is assembled from 2 components worth $50 total. The value added in production (for labor and variable overhead) is $60 per unit, bringing total costs per completed unit to $110. The average lead time for the part is 6 weeks and annual demand is 3,800 units, based on 50 business weeks per year. a. How many units of the part are held, on average, in cycle inventory? What is the dollar value of this inventory? b. How many units of the part are held, on average, in pipeline inventory? What is the dollar value of this inventory? (Hint: Assume that the typical part in pipeline inventory is 50 percent completed. Thus, half the labor and variable overhead cost has been added, bringing the unit cost to $80, or $50 + $60/2). 2. Prince Electronics, a manufacturer of consumer electronic goods, has five distribution centers in different regions of the country. For one of its products, a high-speed modem priced at $350 per unit, the average weekly demand at each distribution center is 75 units. Average shipment size to each distribution center is 400 units, and average lead time for delivery is 2 weeks. Each distribution center carries 2 weeks' supply as safety stock but holds no anticipation inventory. a. On average, how many dollars of pipeline inventory will be in transit to each distribution center? b. How much total inventory (cycle, safety, and pipeline) does Prince hold for all five distribution centers? 3. Terminator, Inc., manufactures a motorcycle part in lots of 250 units. The raw materials cost for the part is $150, and the value added in manufacturing 1 unit from its components is $300, for a total cost per completed unit of $450. The lead time to make the part is 3 weeks, and the annual demand is 4,000 units. Assume 50 working weeks per year. a. How many units of the part are held, on average, as cycle inventory? What is its value? b. How many units of the part are held, on average, as pipeline inventory? What is its value? 4. The following table provides a random sample of the unit values and annual demands of eight SKUs. Categorize these SKUs as A, B, and C items using ABC Analysis. SKU Code Unit Value Demand (Units) A104 $2.10 2,500 D205 $2.50 30 X104 $0.85 350 U404 $0.25 250 L205 $4.75 20 S104 $0.02 4,000 X205 $0.35 1,020 L104 $4.25 50 5. Yellow Press, Inc., buys paper in 1,500-pound rolls for printing. Annual demand is 2,500 rolls. The cost per roll is $800, and the annual holding cost is 15 percent of the cost. Each order costs $50 to process. a. How many rolls should Yellow Press, Inc., order at a time? b. What is the time between orders? 6. Babble, Inc., buys 400 blank cassette tapes per month for use in producing foreign language courseware. The ordering cost is $12.50. Holding cost is $0.12 per cassette per year. a. How many tapes should Babble, Inc., order at a time? b. What is the time between orders? 7. Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 30,000 units per year. It costs Leaky Pipe $10 to process an order to replenish stock and $1 per unit per year to carry the item in stock. Stock is received 4 working days after an order is placed. No backordering is allowed. Assume 300 working days a year. a. What is Leaky Pipe's optimal order quantity? b. What is the optimal number of orders per year? c. What is the optimal interval (in working days) between orders? d. What is the demand during the lead time? e. What is the reorder point? f. What is the inventory position immediately after an order has been placed