Practice Problems: Inventory Management
Problem 1:
ABC Analysis
Stock Number Annual $ Volume Percent of Annual $ Volume
J24 12,500 46.2
R26 9,000 33.3
L02 3,200 11.8
M12 1,550 5.8
P33 620 2.3
T72 65 0.2
S67 53 0.2
Q47 32 0.1
V20 30 0.1
= 100.0
What are the appropriate ABC groups of inventory items?
Problem 2:
A firm has 1,000 “A” items (which it counts every week, i.e., 5 days), 4,000 “B” items (counted every 40 days), and 8,000 “C” items (counted every 100 days). How many items should be counted per day?
Problem 3:
Assume you have a product with the following parameters:
Annual Demand = 360 units
Holding cost per year = $1.00 per unit
Order cost = $100 per order
What is the EOQ for this product?
Problem 4:
Given the data from Problem 3, and assuming a 300-day work year, how many orders should be processed per year? What is the expected time between orders?
Problem 5:
What is the total cost for the inventory policy used in Problem 3?
Problem 6:
Based on the material from Problems 3 – 5, what would cost be if the demand was actually higher than estimated (i.e., 500 units instead of 360 units), but the EOQ established in problem 3 above is used? What will be the actual annual total cost?
Problem 7:
If demand for an item is 3 units per day, and delivery lead-time is 15 days, what should we use for a simple re-order point?
Problem 8:
Assume that our firm produces Type C fire extinguishers. We make 30,000 of these fire extinguishers per year. Each extinguisher requires one handle (assume a 300 day work year for daily usage rate purposes). Assume an annual carrying cost of $1.50 per handle, production setup cost of $150, and a daily production rate of 300. What is the optimal production order quantity?
Do you want your assignment written by the best essay experts? Then look no further. Our team of experienced writers are on standby to deliver to you a quality written paper as per your specified instructions. Order Now, and enjoy an amazing discount!!
