OU Ilallic., FIUUULLIVII ial UN ana Cumunoy ‘The Star Equipment Company purchases 54,000 bearing assemblies each year at a unit cost of $40. The holding cost is $9 per unit per year, and the order cost is $20. (a) What is the economic order quantity? (b) How many orders will be placed in one year? (c) If the lead time is 1 month, what is the reorder point for the assemblies? (d) If the lead time is reduced to 2 weeks, what will be the reorder point? Assume that the following data pertain to an inventory item: annual demand = 6000 units; unit purchase price = $15; ordering cost per order = $25; annual holding cost per unit = $3; lead time = 3 weeks (when the firm operates $0 weeks/year). If the firm's customers do not object to backordering and each unit backordered costs $2 per year, then: (a) What the size of the economic order quantity? (b) What is the maximum inventory level? (c) What is the reorder point? (d) When the reorder point is reached, how many more units will be demanded before the next order arrives? (¢) How many units will be backordered during each order cycle? A mobile home fabricator has an annual demand of 10,000 units for a small refrigerator. The supplier sells the units for $100 in order quantities below 125 and for $95 in order quantities above 124 units, The order cost is $5, and the annual holding cost is 10% of unit value. (a) In what quantities should the item be purchased with an all-units quantity discount? (b} What will be the maximum inventory level? A firm has an annual demand for a component of 3000 units. A fixed cost of $250 is incurred each time an order is placed, and holding costs are computed at 25% of unit value per year. Source A will sell the component for $10 regardless of the order size. Source B will only accept orders of at Icast 600 units at a unit price of $9,50. Source C will charge $9.00 per item but requires a minimum order of 800 units, (a) What Quantity should be purchased and from which source? (b) What are the cost savings in comparison with the other two sources?5 A tire manufacturer plans to produce 40,000 units of a particular type of tire next year, ‘The production rate is 200 tires per day, and there are 250 working days available. The setup cost is $200 per run, and the unit production cost is $15. If holding costs are $11.50 per unit per year, (a) what is the economic production quantity? (b) how many production runs should be made each year? (c) If the production lead time is 5 days, what is the reorder point? 6 — The demand for an item is 9 units per period. The holding cost is $10 per unit per period. The demand can be met by either purchasing or manufacturing, as described by the following data: Purchase Manufacture tem cost $8.00 $7.50 Order / setup cost $20.00 $200.00 Replenishment rate © 18 units/ period What are the minimum cost source and order quantity? 7 Given an annual demand of 8000 units and an economic order quantity of 600 units: (2) in weeks? (b) What maximum What is the economic order interval for the ite inventory level should be established if the lead time is one week and there are 52 operating weeks per year in an economic order interval system? 8 An electronics company uses 20,000 particle beams cach year. The supplier of the beams offers them at the following process: Quantity Ordered Unit Price 1-79 $11.00 800-1199 10.00 1200-1599 9.00 21600 8.00 és‘The cost of an order is $50.00, and the holding cost is 20% of the unit value per year. (a) What order size should be placed to minimize costs with an all-units quantity discount? (b) How long will each order last? A firm produces five products in a work center. The available information is shown in the table. If there are 250 working days available: (a) What is the best production cycle? (b) What is the optimum production run size for each product? (c) What is the annual demand time? Unit Daily Annual Item Annual Production Production Holding Setup i Demand Cost P, Rate p, Cost Cost C, 1 6,000 $6.00 300 $2.10 3.80 2 20,000 4.00 500 1.40 40 3 8,000 6.00 160 1.80 100 4 8,000 2.00 200 50 50 i 5 15,000 4.00 200 1.30 30