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Inventory Management 2

The document outlines various inventory management scenarios for different businesses, including a toy manufacturer, a bakery, a car manufacturer, a computer chip supplier, a discount store, a tire center, and a product inventory analysis. Each scenario presents specific data and requires calculations for optimal batch sizes, inventory costs, and reorder points. The document emphasizes the importance of efficient inventory management to minimize costs and maximize operational efficiency.

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hm712177
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4 views

Inventory Management 2

The document outlines various inventory management scenarios for different businesses, including a toy manufacturer, a bakery, a car manufacturer, a computer chip supplier, a discount store, a tire center, and a product inventory analysis. Each scenario presents specific data and requires calculations for optimal batch sizes, inventory costs, and reorder points. The document emphasizes the importance of efficient inventory management to minimize costs and maximize operational efficiency.

Uploaded by

hm712177
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Inventory Management 2

1- A toy manufacturer produces small wind-up motors, which are then assembled into
toys. The production process is continuous, with the following data on the manufacture
of motors:
• Annual demand = 50,000 units
• Carrying cost = $0.20 per unit per year
• Daily subassembly production rate = 1,000 units
• Daily subassembly usage rate = 200 units
• Setup cost = $85 per batch
Required:
(a) Optimal batch size to minimize cost
(b) Number of days required to produce a batch.
(c) Length of a complete cycle
(d) Average inventory
(e) Total annual inventory cost

2- A bakery, which supplies many retail outlets, uses bulk flour at a rate of 2,000 Kg per
working day. When the bakery places an order for bulk flour, it is delivered at a rate of
8,000 Kg per (working) day after a lead-time of 5 (working) days. The cost of placing,
receiving, and handling an order for bulk flour is LE48.00. The holding cost is estimated
to be LE0.30 per Kg per year.
a. Determine the optimal lot size.
b. Determine: Maximum inventory, Average inventory and Reorder point

3- Race One Motors is an Indonesian car manufacturer. At its largest manufacturing


facility, in Jakarta, the company produces subcomponents at a rate of 300 per day, and
it uses these subcomponents at a rate of 12,500 per year (of 250 working days).
Holding costs are $2 per item per year, and ordering costs are $30 per order.
a) What is the economic production quantity?
b) How many productions runs per year will be made?
c) What will be the maximum inventory level?

4- Bell Computers purchases integrated chips at $350 per chip. The holding cost, as a
percentage of cost, i is 10%, the ordering cost is $120 per order, and sales are steady,
at 400 per month. The company’s supplier, Rich Blue-Chip Manufacturing Inc., has
decided to offer price concessions to attract larger orders. The price structure is shown
below.

What is the optimal order quantity, and what is the optimal annual cost?
5- Wohl’s discount store stocks toy race cars. The store has been given the following
offer:
Discount Number Discount Quantity Discount (%) Discount Price (P)
1 0 to 999 no discount $5.00
2 1,000 to 1,999 4 $4.80
3 2,000 and over 5 $4.75
The ordering cost= $ 49 per order, annual demand is 5000 cars. The inventory
carrying charge as a percent of cost is 20%. What order quantity will minimize the
total cost?

6- Rocky Mountain Tire Center sells 20,000 go-cart tires per year. The ordering cost for
each order is $40, and the holding cost is 20% of the purchase price of the tires per
year. The purchase price is $20 per tire if fewer than 500 tires are ordered, $18 per tire
if 500 or more—but fewer than 1,000—tires are ordered, and $17 per tire if 1,000 or
more tires are ordered.
a) How many tires should Rocky Mountain order each time it places an order?
b) What is the total cost of this policy?

7- David Alexander has compiled the following table of six items in inventory at Angelo
Products, along with the unit cost and the annual demand in units:
ID code Unit cost Annual demand (units)
XX1 5.84 1200
B66 5.4 1110
3CPO 1.12 896
33CP 74.54 1104
R2D2 2 1110
RM5 2.08 961

Use ABC analysis to determine which item(s) should be carefully controlled using a
quantitative inventory technique and which item(s) should not be closely controlled.

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