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Inventory Numerical

The document contains 7 numerical questions regarding inventory management, economic order quantity, and ABC analysis. Several questions provide cost data like ordering costs, carrying costs, demand levels, and ask to determine optimal order quantities, order frequencies, annual costs, and which products a firm should keep closest control over. The final question asks about order size recommendations given a range of possible demand and costs.

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388 views2 pages

Inventory Numerical

The document contains 7 numerical questions regarding inventory management, economic order quantity, and ABC analysis. Several questions provide cost data like ordering costs, carrying costs, demand levels, and ask to determine optimal order quantities, order frequencies, annual costs, and which products a firm should keep closest control over. The final question asks about order size recommendations given a range of possible demand and costs.

Uploaded by

jehad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Numerical:

Q-1: Your company has compiled the following data on the small set of products
that comprise the specialty repair parts division. Perform ABC analysis on the data.
Which products do you suggest the firm keep the tightest control over? Explain.

Q-2: Perform an ABC analysis on the following set of products


Q-3: The soft goods department of a large department store sells 175 units per
month of a certain large bath towel. The unit cost of a towel to the store is $2.50
and the cost of placing an order has been estimated to be $12.00. The store uses an
inventory carrying charge of 27% per year. Determine the optimal order quantity,
order frequency, and the annual cost of inventory management. If, through
automation of the purchasing process, the ordering cost can be cut to $4.00, what
will be the new economic order quantity, order frequency, and annual inventory
management cost? Explain these results.
Q-4: A firm that makes electronic circuits has been ordering a certain raw material
250 ounces at a time. The firm estimates that carrying cost is 30% per year, and
that ordering cost is about $20 per order. The current price of the ingredient is
$200 per ounce. The assumptions of the basic EOQ model are thought to apply.
For what value of annual demand is their action optimal?
Q-5: Montegut Manufacturing produces a product for which the annual demand is
10,000 units. Production averages 100 per day, while demand is 40 per day.
Holding costs are $2.00 per unit per year; set-up costs $200.00. If they wish to
produce this product in economic batches, what size batch should be used? What is
the maximum inventory level? How many order cycles are there per year? How
much does management of this good in inventory cost the firm each year?
Q-6: Per Norstrom supplies computer systems to a warehouse in Rotterdam. He
sells 16 systems a week. The cost of an average system is $5,000, while order
administration costs and delivery from Malaysia cost $1,000. The lead time is
around 4 weeks and holding costs are around 16 per cent a year. What policy
would you recommend for Per?
Q-7: A company is introducing a new item and it has forecast likely demand next
year as between 100 and 130 units. The costs are uncertain, but the reorder cost is
somewhere between $50 and $70, and the holding cost is between 20 per cent and
25 per cent of unit cost a year. If the unit cost is $200, what can you say about the
order size?

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