Use the following information to answer the next six questions:
An office supply store must determine the best inventory policy for ordering boxes of copier paper. Annual demand is nearly constant at 10,400 boxes and when orders are placed, an entire shipment arrives at once. The cost per box is $24 and the inventory holding cost is 25%. It costs $60 each time to place an order, including preparation time and communication charges, and the lead time is 3 days. The store is open 260 days a year (5 days a week, 52 weeks per year).
a.What is daily demand?
b.What is the optimal order quantity (Q*)?
c.What is the reorder point?
d.How many orders should the company place each year?
e.How often should an order be placed? (Enter number of days)
f.What is the total annual inventory cost for the company?
A weekly sports magazine publishes a special edition for the World Series. The sales forecast is for the number of copies to be normally distributed with mean 500,000 copies and standard deviation 25,000 copies. It costs $.35 to print a copy, and the newsstand price is $1.95. Unsold copies can be sold to a recycling center for $.15 each.
a.What is the per unit cost of overestimation?
b.What is the per unit cost of underestimation?
c. How many copies should the sports magazine print to minimize inventory costs?
d.What's the probability they will have copies left over?
Manufacturing produces commercial refrigeration units in batches. It costs about $100 to set up the manufacturing process, and the holding cost per unit is about 75 cents per year. When the production process has been set up, 60 refrigeration units can be manufactured daily. The demand during the production period has traditionally been 50 units per day. Brown operates its refrigeration unit production area 200 days per year.
a.What is the recommended production lot size (Q*)?
b. If there is a five-day lead time to set up the line, what is the recommended reorder point?
c.How many production runs should be made each year?
d.What is the cycle time?
e.What is the maximum inventory?
f.What is Brown Manufacturing's total annual inventory cost?
The Fitness Shop is considering ordering a special model exercise machine. Each unit will cost the shop $400 and it will sell for $500. Any units not sold at the regular price will be sold at the year-end model clearance sale at half-price. Assume that demand follows a normal probability distribution with ? = 25 and ? = 6.
a. What is the per unit cost of overestimation?
b.What is the per unit cost of underestimation?
c. What is the recommended order quantity?
d.What is the probability The Fitness Shop will sell all their exercise machines?
