SHORT ANSWER.
Write the word or phrase that best completes each statement or answers the question. 70)
Due to unprecedented growth during the year Denise's Flowers decided to use some of its surplus cash to increase the size of several inventory order quantities that had been previously determined using an EOQ model.
Required:
For each of the following items tell whether the action caused an increase, a decrease, or no change to the EOQ.
a.average inventory
b.cost of goods sold
c.number of orders per year
d.total annual carrying costs
e.total annual carrying and ordering costs
f.total annual ordering costs 70)
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71)
Berryton Products' only product has an annual demand of 1,000 units. The cost of placing an order is $20 and the cost of carrying one unit in inventory for one year is $10.
Required:
Determine the economic order quantity. 71)
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72)
Bottle It has one particular product that has an annual demand of 1,000 units. Total manufacturing costs per unit total $40 and set-up costs per batch are $15. Direct material ordering costs for the product total $10 per order. Currently the carrying costs per unit are 25 percent of manufacturing costs.
Required:
Determine the economic manufacturing (order) quantity. 72)
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73)
The only product of a company has an annual demand of 2,000 units. The cost of placing an order is $40
and the cost of carrying one unit in inventory for one year is $16.
Required:
Determine the economic order quantity.
73)
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74)
The annual demand for red, medium polo shirts, for Clothes, Inc. is 25,000 units. The cost of placing an order is $80, and the cost of carrying one unit in inventory for one year is $25.
Required:
a.Use the economic order quantity model to determine the optimal order size.
b.Determine the reorder point assuming a lead time of 10 days, and a work year of 250 days.
c.Assuming the maximum lead time is 20 days and the maximum daily demand is 125 units, determine the safety stock required to prevent stockouts. 74)
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75)
An inventory item of XYZ Manufacturing has an average daily demand of 10 units with a maximum daily demand of 12 units. The economic order quantity is 200 units. The reorder point is 50 units. Safety stocks are set at 94 units.
Required:
a.Determine the inventory level at the time of reordering.
b.Determine the purchase order lead time.
d.Determine the maximum purchase order lead time that the company can experience before it has a stockout. 75)
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76)
Ralph was in the process of completing the quarterly planning for the purchasing department when a
major computer malfunction lost most of his data. For direct material XXX he was able to recover the
following:
Average inventory level of XXX200
Orders per year40
Average daily demand48
Working days per year250
Annual ordering costs$4,000
Annual carrying costs$6,000
Ralph purchases at the EOQ quantity level.
Required:
Determine the annual demand, the cost of placing an order, the annual carrying cost of one unit, and the economic order quantity.
76)
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77)
The IBP Grocery orders most of its items in lot sizes of 10 units. Average annual demand per side of beef is 720 units per year. Ordering costs are $25 per order with an average purchasing price of $100. Annual inventory carrying costs are estimated to be 40 percent of the unit cost.
Required:
a.Determine the economic order quantity.
b.Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity.
c.Since the shelf life is limited the IBP Grocery must keep the inventory moving. Assuming a 360-day year, determine the optimal lot size under each of the following: (1) a 20-day shelf life and (2) a 10-day shelf life. 77)
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78)
For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of
the salesperson who calls on the company monthly. A new purchasing agent has been hired by the
company who wants to start using the economic-order-quantity method and its supporting decision
elements. She has gathered the following information:
Annual demand in units250
Days used per year250
Lead time, in days10
Ordering costs$100
Annual unit carrying costs$20
Required:
Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs.
78)
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79)
A jeweller orders gems in lot sizes of 1,250 gems. The annual demand for emeralds is 6,250 gems. Ordering costs are $200 per order and carrying costs are $10 per unit annually.
Required:
a.Determine the economic order quantity.
b.Determine the amount of annual cost savings if the company changes from an order size of 1,250 units to the economic order size.
c.One supplier offers a discount of $2 per unit off the purchase price of orders in lots of 625 units or more. What impact would this have on the EOQ and should the order size be changed? 79)
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80)
The annual demand for a company's product is 3,750 units, and monthly demand varies from 200 to 400 units with the following probability of demand:
200 units have a 25 percent probability
300 units have a 50 percent probability
400 units have a 25 percent probability
The EOQ model provides an optimal order quantity of 250 units. The opportunity costs of being out of stock are $2 per unit, with a carrying cost of $13 per unit, and the reorder point is 250 units.
Required:
a.Prepare a table showing stockouts, expected stockout costs, related carrying costs, and total costs, at each level of demand if the selected safety stocks are: 0, 50, 100 and 150.
b.What is the best level of safety stock to carry? 80)
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