Question

1.	Basic EOQ Question:
The inventory manager of ABC, Ltd., wants to order flour for its bakery in a cost effective manner.
The bakery uses an average of 12,000 bags a year. Preparing an order and receiving a shipment of flour
involves a cost of $40 per order. Annual carrying costs are $37.50 per bag.
REQUIRED:
A.	Determine the economic order quanity.
B.	What is the average number of bags on hand?
C	How many orders will there be per year?
D	Compute the total cost of ordering and carrying flour per year.
E.	If ordering costs were to increase by $2 per order, how much would that affect the minimum
	annual total cost?
2.	BASIC EPQ QUESTION:
	A company is about to begin production of a new product.   The manager of the department that
	will produce one of the components for the product wants to know how often the machine used to produce
	the item will be available for other work. The machine will produce the item at a rate of 80 units
	a day. Fifty units will be used daily in assembling the final product. Assembly will take place five days
	a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine
	ready for a production run, at a cost of $200.
	Inventory holding costs will be $10 per year.
REQUIRED:
a.	What run quantity (EPQ) should be used to minimize total annual costs?
b	What is the length of a production run in days?
c.	What is the cycle time?
d	What would the average inventory be for this lot size?
e	About how many runs per year would there be?
f	If the manager wants to run another job between runs of this item, and needs a minimum of 10 days
	per cycle for the other work, will there be enough time?
g	During production, at what rate will inventory build up?
3	INVENTORY DECISIONS - VARIABLE DEMAND
	Select (A) or (B) -- you may do both; but credit will be awarded for the first one you complete!
A	Given this information:
	i.   Expected demand during lead time = 600 units.
	ii. Standard deviation of lead time demand = 60 units.
	Determine each of the following, assuming that lead time demand is distributed normally:
	a. The safety stock needed to attain a 1 percent risk of stockout during lead time.
	b. The reorder point (ROP) that will provide a risk of stockout of 1 percent during lead time.
	c. Would a stockout risk of 2 percent require more or less safety stock than a 1 percent risk?
	d. Would the ROP be larger, smaller, or unaffected if the acceptable risk was 2 percent instead of 1%?
	Explain.
B	Given this information:
	Average weekly demand = 100 units.
	Standard deviation = 10 units.
	Lead time = 6 weeks.
	Acceptable stockout risk = 2.5%
	Ordering cost = $30
	Annual Holding cost = 20%
	Unit cost (purchase price) = $20
	The company operates = 50 weeks a year.
	Weekly usage rates are distributed normally.
	Determine each of the following, assuming that lead time demand is distributed normally:
	a. Order quantity (EOQ).
	b. The safety stock needed to attain a 2.5 percent risk of stockout during lead time.
	c. The reorder point (ROP) that will provide a risk of stockout of 2.5 percent during lead time.

Answer 1

Economic Order Quantity

Chegg terms asks the experts to solve 4 sub-parts in one go. Request you to ask the rest questions separately.