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Exam 14: Inventory Models

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Question 21

True/False

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​For the periodic review inventory model presented in the textbook,it is assumed that a special replenishment order will be placed in the event of a stockout between review points.

A) True
B) False

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Question 22

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The cost of overestimating demand is usually harder to determine than the cost of underestimating demand.

A) True
B) False

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Question 23

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Chez Paul Restaurant orders special Styrofoam "doggy bags" for its customers once a month and lead time is one week.Weekly demand for doggy bags is approximately normally distributed with an average of 120 bags and a standard deviation of 25.Chez Paul wants at most a 3% chance of running out of doggy bags during the replenishment period.If he has 150 bags in stock when he places an order,how many additional bags should he order? What is the safety stock in this case?

What costs should a manager consider when setting order points?​

At the optimal order quantity for the quantity discount model,the sum of the annual holding and ordering costs is minimized.

The maximum inventory with backorders is

Amazing Bakers sells bread to 40 supermarkets.It costs Amazing $1,250 per day to operate its plant.The profit per loaf of bread sold in the supermarket is $.025.Any unsold bread is returned to the Amazing Thrift Store to be sold at a loss of $.015. a.If sales follow a normal distribution with μ = 70,000 and σ = 5,000 per day,how many loaves should Amazing bake daily? b.Amazing is considering a different sales plan for which the profit per loaf of bread sold in the supermarket is $.03 and the loss per loaf bread returned is $.018.If μ = 60,000 and σ = 4,000 per day,how many loaves should Amazing bake daily?

In the EOQ model,the average inventory per cycle over many cycles is Q/2.

Annual purchase cost is included in the total cost in

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 800,000 copies and standard deviation 60,000 copies.It costs $.35 to print a copy,and the newsstand price is $1.95.Unsold copies will be scrapped.How many copies should be printed?

As lead time for an item increases,the cycle time increases.

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

Inventory

For the EOQ model,which of the following relationships is incorrect?

In the single-period inventory model with probabilistic demand,

Zip Games purchases blank DVD disks onto which it copies its software for sale through its mail order operation.A disk costs Zip $.20.Processing an order for more disks cost $15.Zip uses 60000 disks annually,and the company has a 25% cost of capital. a.Find the optimal order quantity. b.How many orders are placed annually? c.How frequently will orders be placed?

For the inventory model with planned shortages,the optimal order quantity results in

When quantity discounts are available,order an amount from the highest discount category.

The Super Discount store (open 24 hours a day,every day)sells 8-packs of paper towels,at the rate of approximately 420 packs per week.Because the towels are so bulky,the annual cost to carry them in inventory is estimated at $.50.The cost to place an order for more is $20 and it takes four days for an order to arrive. a.Find the optimal order quantity. b.What is the reorder point? c.How often should an order be placed?

An office supply store open 5 days a week must determine the best inventory policy for boxes of copier paper.Weekly demand is nearly constant at 250 boxes and when orders are placed,then entire shipment arrives at once.The cost per box is $22 and the inventory holding cost is 30%.Orders are placed at a cost of $40 each,including preparation time and communication charges,and the lead time is 2 days. a.Find the optimal order quantity. b.What is the reorder point? c.How often should an order be placed? d.What is the cycle time?