Which line segment represents the length of time to consume the total quantity of materials ordered?
Answer(s): C
Time is shown along the axis. The line segment AC depicts the time to consume an entire order to reduce the inventory to the safety stock).
The Huron Corporation purchases 60, 000 headbands per year. The average purchase lead time is 20 working days, and the maximum lead time is 27 working days. Safety stock equals 1, 750 units. The corporation works 240 days per year. Huron should reorder headbands when the quantity in inventory reaches
Answer(s): B
The reorder point is the quantity on hand when an order is placed. lfith a 20-day normal lead time, a safety stock of 1, 750 units, and usage of 250 units per day, an order should be placed when 27 days of inventory are on hand, a total of 6, 750 units 250 units 27 days). Jed Ryerson Computer Furniture, Inc. RCF) manufactures a line of office computer chairs. The annual demand for the chairs is estimated to be 5, 000 units. The annual cost to hold one unit in inventory is US 10 per year, and the cast to initiate a production run is US $1, 000. There are no computer chairs on hand, and RCF has scheduled four equal production runs of computer chairs for the coming year, the first of which is to be run immediately. RCF has 250 business days per year, sales occur uniformly throughout the year, and production start-up is within one day. RCF is considering using the following formula for determining the economic order quantity EOQ):2ADECQ =KIf: A = cast to initiate a production run per purchase order D = annual unit demandK = cost of carrying one unit per year
What is the number of production runs per year of computer chairs that would minimize the sum of carrying and setup costs for the coming year?
Answer(s): D
The EOQ minimizes the sum of carrying and setup costs. The EOQ is the amount at which carrying costs are equal to setup casts. Thus, plugging the data into the EOQ formula results in the following:2 US $1000 5000ECQ = = 1, 000 units$10Thus, if each lot consists of 1, 000 units, five production runs per year are needed to meet the 5, 000-unit demand. At this level, setup costs will total US $5, 000 5 x $1, 000). Carrying costs will also equal US $5, 000 10 per unit carrying cost average inventory of 500 units). Accordingly, total costs are minimized at US $10, 000. Jed Ryerson Computer Furniture, Inc. RCF) manufactures a line of office computer chairs. The annual demand for the chairs is estimated to be 5, 000 units. The annual cost tic. hold one unit in inventory is US $10 per year, and the cost to initiate a production run is US $1, 000. There are no computer chairs on hand, and RCF has scheduled four equal production runs of computer chairs for the coming year, the first of which is to be run immediately. RCF has 250 business days per year, sales occur uniformly throughout the year, and production start-up is within one day. RCF is considering using the following formula for determining the economic order quantity EOQ):2ADECQ =KIf: A = cast to initiate a production run per purchase order D = annual unit demandK = cost of carrying one unit per year
If RCF does not maintain a safety stock, the estimated total carrying costs for the computer chairs for the coming year based on their current schedule is
Given four production runs and an annual demand of 5, 000 units, each production run must generate 1, 250 units. Inventory will total 1, 250 units at the completion of each run but will decline to zero just prior to the next run. Thus, the average inventory is 625 units 1, 250 - 2), and the total carrying cost is US $6, 250 625 units x $10).
Each stockout of a product sold by Company I-: costs US $I, 750 per occurrence. The carrying cost per unit of inventory is US $5 per year, and the company orders 1, 500 units of product 24 times a year at a cost of US $100 per order. The probability of a stockout at various levels of safety stock isWhat is the optimal safety stock level for the company?
The total expected cost of safety stock equals the sum of the expected annual stockout cost and the expected annual carrying cost. Annual expected stockout cost equals the cost per occurrence US $1, 750), times the probability of a stockout per cycle, times the number of cycles 24). Annual expected carrying cost of a safety stock equals the unit carrying cost US $5) times the number of units. Hence, a safety stock of 400 units has the lowest total expected cast.
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