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Lecture 8 Practice Problems

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78 views

Lecture 8 Practice Problems

Uploaded by

mohfarid150
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Arab Academy for Science, Technology and Maritime Transport

Graduate School of Business


Master of Business Administration Program
Operations Management Course
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Practice Questions and Problems (Lecture 9)

Questions

1. Identify the different types of inventory used.


2. Explain the different functions of its inventory.
3. Explain the objectives of inventory management at the local business.
4. Describe how the objectives of inventory management can be measured.
5. Explain the different methods for measuring customer service.
6. Compare the two techniques, inventory turnover and weeks of supply.
7. Describe the relevant costs associated with inventory policies.
8. Explain what is included in the annual holding cost.
9. Describe what is included in ordering or setup costs.
10. Describe what is included in shortage costs.
11. Explain the assumptions of the EOQ model.
12. Describe techniques for determining order quantities other than the EOQ or EPQ.
13. Describe how changes in the demand, ordering cost, or holding cost affect the EOQ.
14. Explain how a company can justify smaller order quantities.
15. Explain what safety stock is for.
16. Explain how safety stock affects the reorder point.
17. Describe the type of products that require a single-period model.
18. Explain the basic concept of ABC analysis.
19. Explain the concept of perpetual review.
20. Explain how two-bin systems work.

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Arab Academy for Science, Technology and Maritime Transport
Graduate School of Business
Master of Business Administration Program
Operations Management Course
----------------------------------------------------------------------------------------------
Problems

1. Tacky Souvenirs sells lovely handmade tablecloths at its island store. These
tablecloths cost Tacky $15 each. Customers want to buy the tablecloths at a rate of 240
per week. The company operates 52 weeks per year. Tacky, the owner, estimates his
ordering cost at $50. Annual holding costs are 20 percent of the unit cost. Lead time is 2
weeks. Using the information given,
(a) Calculate the economic order quantity.
(b) Calculate the total annual costs using the EOQ.
(c) Determine the reorder point.

2. Jack’s Packs manufactures backpacks made from microfabrics. The cutting


department prepares the material for use by the backpack stitching department. The
cutting department can cut enough material to make 200 backpacks per day. The
backpack stitching department produces 90 backpacks per day. Annual demand for the
product is 22,500 units. The company operates 250 days per year. Estimated setup cost
is $60. Annual holding cost is $6 per backpack.
(a) Calculate the economic production quantity for the cutting department.
(b) Calculate the total annual costs for the EPQ.

3. Ye Olde Shoe Repaire has customers requesting leather soles throughout the year.
The owner, Warren, buys these soles from The Leather Company (TLC) at a price of $8
per pair. In an effort to improve profitability by selling in greater quantities, the sales rep
for TLC has made the following offer to Ye Olde Shoe Repaire: If Warren orders from 1
to 50 pairs at a time, the cost per pair is $8.00. If the order is between 51 and 100 pairs
at a time, the cost is $7.60. On orders for more than 100 pairs at a time, the cost per pair
is $7.40. The owner estimates annual demand to be 625 pairs of soles. Holding costs are
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Arab Academy for Science, Technology and Maritime Transport
Graduate School of Business
Master of Business Administration Program
Operations Management Course
----------------------------------------------------------------------------------------------
20 percent of unit price. The cost to place an order is $10. Determine the most cost-
effective ordering policy for Ye Olde Shoe Repaire.
4. Frank’s Ribs knows that the demand during lead time for his world-famous ribs is
described by a normal distribution with a mean of 1000 pounds and a standard deviation
of 100 pounds. Frank is willing to accept a stockout risk of approximately 2 percent.
(a) Determine the appropriate z value.
(b) Calculate how much safety stock Frank should hold.

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