Questions 1-4

For an inventory item, suppose the demand is 845/month, lead time is 1.2 weeks, and safety stock is 5. The item cost is $16, the unit ordering cost is $216/order, and the unit carrying cost is $0.20/item/quarter.

Question 1. Find the optimal inventory policy that minimizes total cost for a periodic review system.

	A. ( 234 , 2340 )				E. ( 7 weeks , 2340 )
	B. ( 239 , 2340 )				F. ( 12 weeks , 1351 )
	C. ( 234 , 1351 )				G. ( 7 weeks , 1351 )
	D. ( 239 , 1351 )				H. ( 12 weeks, 2340 )
					I. None of the above

Question 2. Find the optimal inventory policy that minimizes total cost for a continuous review system.

	A. ( 234 , 2340 )				E. ( 7 weeks , 2340 )
	B. ( 239 , 2340 )				F. ( 12 weeks , 1351 )
	C. ( 234 , 1351 )				G. ( 7 weeks , 1351 )
	D. ( 239 , 1351 )				H. ( 12 weeks, 2340 )
					I. None of the above

Question 3. How many of the statements are true for the economic order quantity in this problem?

(A) 0 (B) 1 (C) 2 (D) 3 (E) 4

Statement 1. The total annual ordering cost (TOC) is $936

Statement 2. The total annual carrying cost (TCC) is $940

Statement 3. The total annual cost (TC) is $1876

Statement 4. The total carrying cost for safety stock over six months is $4

Question 4. How many statements are true?

(A) 0 (B) 1 (C) 2 (D) 3 (E) 4

Statement 1. EOQ increases as the demand rate decreases

Statement 2. EOQ increases as the unit ordering cost increases

Statement 3. EOQ increases as the unit carrying cost increases

Statement 4. EOQ increases as the ratio of the unit ordering cost to the unit carrying cost increases.

Part 2. The inventory manager has typically ordered a quantity of 800 each time an order is needed for one of their popular tires to take advantage of the discount provided by the supplier and save the company money. The following discount schedule has just been received reflecting recent changes in some of the discount percentages. The manager still maintains that an order quantity of 800 will save the company the most money because of the quantity discount.

Order Quantity	Discount	Acquisition Cost
0-399	0%	79.95
400-799	5%	75.95
800 or more	10%	71.95

Last year, for an annual demand of 1600 tires and a lot size of 800 tires which resulted in an acquisition cost of $71.95, they had a total ordering cost of $160 and a total carrying cost of $22498. They forecast an annual demand of 1600 tires again for this year. Their unit carrying cost per dollar of inventory and their unit ordering cost per order for this year is assumed to be the same as last year.

Question 5. What is the optimal inventory policy that minimizes total cost for a periodic review system?

(A) A policy of ( 2 weeks , 64 ) for a total cost of $131920

(B) A policy of ( 3 months, 400 ) for a total cost of $133714

(C) A policy of ( 2 quarters , 800 ) for a total cost of $137778

(D) A policy of ( 1 quarter , 400 ) for a total cost of $133714

(E) none of the above