important
1 Joe's pizza parlor is attempting to minimize total inventory cost. The cost of each pizza is $1.25. The cost of capital is 18% and the physical cost of maintaining his pizza inventory is currently running at 2% of cost. Joe pays his secretary/bookkeeper $7.50 per hour. Joe's secretary can place an order in 15 minutes with materials and overhead cost of $15.00 per order. Records show, weekly pizza sales as follows:
Weekly Pizza Sales
Week
Sales(units)
1
475
2
515
3
525
4
500
5
485
2
a. How many units should Joe order?
b. How often should Joe place each order?
c. What is the minimum TIC?
3 Suppose R & B Beverage Company has a soft-drink product that has a constant annual demand rate of 3,600 cases. A case of the soft drink costs R & B $3.00. If ordering costs are $20 per order and inventory holding costs are charged at 25%, what are the EOQ and cycle time in days for this product?
4 A general property of the EOQ inventory model is that total inventory holding and total ordering costs are equal or balanced at the optimal solution. Use the above data to show that this result is observed.
5 The XYZ Company purchases a component used in the manufacturing of automobile generators directly from the supplier. XYZ's generator production operation, which is operated at a constant rate, will require 1,000 components per month throughout the year. If ordering costs are $25.00 per order, unit cost is $2.50 per component, and annual inventory holding costs are charged at 20%, answer the following inventory policy questions for XYZ.
a. What is the EOQ for this component?
b. What the cycle time in months?
c. What are the total annual inventory holding and ordering costs associated with your recommended EOQ?
d. Assuming 250 days of operation per year and a lead time of 5 days, what is the reorder point for the XYZ Company? 6. Suppose that XYZ's management likes the operational efficiency of ordering in quantities of 1,000 units and
Weekly Pizza Sales
Week
Sales(units)
1
475
2
515
3
525
4
500
5
485
2
a. How many units should Joe order?
b. How often should Joe place each order?
c. What is the minimum TIC?
3 Suppose R & B Beverage Company has a soft-drink product that has a constant annual demand rate of 3,600 cases. A case of the soft drink costs R & B $3.00. If ordering costs are $20 per order and inventory holding costs are charged at 25%, what are the EOQ and cycle time in days for this product?
4 A general property of the EOQ inventory model is that total inventory holding and total ordering costs are equal or balanced at the optimal solution. Use the above data to show that this result is observed.
5 The XYZ Company purchases a component used in the manufacturing of automobile generators directly from the supplier. XYZ's generator production operation, which is operated at a constant rate, will require 1,000 components per month throughout the year. If ordering costs are $25.00 per order, unit cost is $2.50 per component, and annual inventory holding costs are charged at 20%, answer the following inventory policy questions for XYZ.
a. What is the EOQ for this component?
b. What the cycle time in months?
c. What are the total annual inventory holding and ordering costs associated with your recommended EOQ?
d. Assuming 250 days of operation per year and a lead time of 5 days, what is the reorder point for the XYZ Company? 6. Suppose that XYZ's management likes the operational efficiency of ordering in quantities of 1,000 units and