QUESTION 2 Toysrfun is a company that purchases toys from abroad for sale in Namibia. The company is concerned about inventory management operations. It is considering adopting an inventory management system based upon the EOQ model. The company's estimates of its inventory management costs are shown below: Storage costs Insurance Handling % Obsolescence Opportunity costs of funds invested in inventory Fixed costs associated with placing each order for inventory are N$311.54. 3 1 1 3 10 The purchase price of the toys to Toyzrfun N$4.50. There is a two-week delay between the time that new inventory is ordered from suppliers and the time that it arrives. Sales 12 000 16 000 20 000 24 000 The toys are sold by the company at N$6.30 each. The variable costs to Toyzrfun Ltd of selling is N$0.30 per unit. Demand for the toys from Toyzrfun's customers averages 10 000 units per week, but recently it has varies from 6 000 to 14 000 units per week. Based on the recent evidence, probability of unit sales in any two week period has been estimated as follows: 0.20 0.05 Probability 0.05 0.20 0.50 28 000 If adequate inventory is not available when demanded by Toyzrfun's customers in any two-week period,

QUESTION 2 Toysrfun is a company that purchases toys from abroad for sale in Namibia. The company is concerned about inventory management operations. It is considering adopting an inventory management system based upon the EOQ model. The company's estimates of its inventory management costs are shown below: Storage costs Insurance Handling % Obsolescence Opportunity costs of funds invested in inventory Fixed costs associated with placing each order for inventory are N$311.54. 3 1 1 3 10 The purchase price of the toys to Toyzrfun N$4.50. There is a two-week delay between the time that new inventory is ordered from suppliers and the time that it arrives. Sales 12 000 16 000 20 000 24 000 The toys are sold by the company at N$6.30 each. The variable costs to Toyzrfun Ltd of selling is N$0.30 per unit. Demand for the toys from Toyzrfun's customers averages 10 000 units per week, but recently it has varies from 6 000 to 14 000 units per week. Based on the recent evidence, probability of unit sales in any two week period has been estimated as follows: 0.20 0.05 Probability 0.05 0.20 0.50 28 000 If adequate inventory is not available when demanded by Toyzrfun's customers in any two-week period,

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

See similar textbooks

Similar questions

A material manager adopts the policy to place an order for a minimum quantity of 500 of a particular item in order to avail a discount of 10 percent. It was found from the company records that for last year 8 orders were placed each of size 200 Nos, ordering cost is ksh 500 per order. Inventory carrying charges at 40 per cent cost unit is ksh 400. (a) Show whether the purchase manager is justified in his decision (b) What is the effect of this decision on the company
Barbara Flynn is in charge of maintaining hos-pital supplies at General Hospital. During the past year, the mean lead time demand for bandage BX-5 was 60 (and wasnormally distributed). Furthermore, the standard deviation forBX-5 was 7. Ms. Flynn would like to maintain a 90% service level.a) What safety stock level do you recommend for BX-5?b) What is the appropriate reorder point?
PHL Manufacturing assembles security monitors. It purchases 900 black-and-white cathode ray tubes per month at $80 each. Ordering costs are $30, and annual carrying costs are 25 percent of the purchase price. - a) Determine the optimal quantity (4 points) - b) Find the total annual cost of ordering and carrying the inventory (2 points) - c) If the supplier offer a price of $79 per tube for ordering 1200 tubes in a lot, would you evaluate and advise PHL to take advantage of the offer?
Barbara Flynn is in charge of maintaining hospital supplies at General Hospital. During the past year, themean lead time demand for bandage BX-5 was 60 (and wasnormally distributed). Furthermore, the standard deviationfor BX-5 was 7. Ms. Flynn would like to maintain a 90%service level. a) What safety stock level do you recommend for BX-5?b) What is the appropriate reorder point?
A large distributor of oil-well drilling equipment operated over the past two years with EOQ policies based on an annual holding cost rate of 22%. Under the EOQ policy, a particular product has been ordered with a Q* 80. A recent evaluation of holding costs shows that because of an increase in the interest rate associated with bank loans, the annual holding cost rate should be 27%. a. What is the new economic order quantity for the product? b. Develop a general expression showing how the economic order quantity changes when the annual holding cost rate is changed from I to I
2. Gursoy Mobile Homes has an annual demand of 10,000 units for a small refrigerator. The supplier sells the units for $100 in order quantities below 124 and for $95 in order quantities above 125 units. The order cost is $5, and the annual holding cost is 10% of unit value. a) In what quantities should the item be purchased with an all-units quantity discount? b) If an incremental quantity discount schedule is in effect, how many refrigerators should Gursoy order each time an order is placed? c) Compare the cost savings for parts a) and b) with respect to the original case without discount. Which schedule is better?
Suppose that we would like to determine Reorder Point for the product. From the historical data the manager determined demand during lead-time for that product fits Normal distribution with a mean of 200 and standard deviation of 10 products. The maximum stock out risk is 10%. Answer the following questions according to the (Q, R) system. a) Find the safety stock if the lead time is 2 weeks. b) Find the reorder point. c) Find the reorder point if the stock out risk decreases to 1%. Comment on the result.
B). As an inventory manager, you must decide on the order quantity for an item. Its annual demand is 679 units. Ordering costs are $7 each time an order is placed, and the holding cost is 10% of the unit cost. Your supplier provided the following price schedule. Quantity Price per Unit 1 - 100 $5.65 101 - 350 $4.95 351 or more $4.55 What ordering-quantity policy do you recommend?
The sales of Whole Care mouthwash at Jen's of Michigan over the past six months have averaged 2,000 cases per month, which is the current order quantity. Jen's of Michigan's cost is $12.00 per case, and ordering cost is $38. The company estimates its cost of capital to be 12 percent. Insurance, taxes, breakage, handling, and pilferage are estimated to be approximately 6 percent of the item cost. Lead time is 3 days, and considering weekends and holidays, Tom's of Maine operates 250 days per year. Based on the above information please answer the following questions What is EOQ? What is the cost reduction? What is the reorder point? What is Time between Orders (TBO)?
As with other products, Fisher-Price faces the decision of how many Weather Teddy units to order for the comingholiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning themarket potential. The product management team asks you for an analysis of the stock-out probabilities forvarious order quantities, an estimate of the profit potential, and to help make an order quantity recommendation.Fisher-Price expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains afterthe holiday season, Fisher-Price will sell all surplus inventory for $5 per unit. After reviewing the sales historyof similar products, Fisher-Price’s senior sales forecaster predicted an expected demand of 20,000 units with a.95 probability that demand would be between 10,000 units and 30,000 units. Compute the probability of a stock-out for the…
ACME Company is a big supplier that wants to make it difficult for new suppliers to take sales away from its important customer BAKER. Currently ACME sells BAKER 10,000 units yearly at a cost of $75.75 per unit. And BAKER is placing orders of EOQ. ACME wants BAKER to increase the size of its next order to 3500 units by offering a price discount. Ordering costs are $320 per order and holding cost is 20% of item value. What is the smallest discount (new discount price), that ACME needs to offer BAKER to make it economical to purchase 3500 units next time? O 68.13 O 66.65 O 70.35 74.05 O 71.83 0 0 0
As with other products, Fisher-Price faces the decision of how many Weather Teddy units to order for the comingholiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning themarket potential. The product management team asks you for an analysis of the stock-out probabilities forvarious order quantities, an estimate of the profit potential, and to help make an order quantity recommendation.Fisher-Price expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains afterthe holiday season, Fisher-Price will sell all surplus inventory for $5 per unit. After reviewing the sales historyof similar products, Fisher-Price’s senior sales forecaster predicted an expected demand of 20,000 units with a.95 probability that demand would be between 10,000 units and 30,000 units. Question: One of Fisher-Price’s managers felt…