Kendi Company uses 800 units of a product per year on a continuous basis. The product has a Fixed Cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days’ usage in inventory as a safety stock. Show Computations and Explanations. A. Calculate the EOQ. B. Determine the Average Level of Inventory. (Note: Use a 365-day year to calculate daily usage.) (Format: 111.11) C. Determine the Reorder Point. (Format: 11.11)
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Kendi Company uses 800 units of a product per year on a continuous basis. The product has a Fixed Cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days’ usage in inventory as a safety stock. Show Computations and Explanations.
A. Calculate the EOQ.
B. Determine the Average Level of Inventory. (Note: Use a 365-day year to calculate daily usage.) (Format: 111.11)
C. Determine the Reorder Point. (Format: 11.11)
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- EOQ, reorder point, and safety stock Alexis Company uses 916 units of a product per year on a continuous basis. The product has a fixed cost of $60 per order, and its carrying cost is $3 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity. a. Alexis' EOQ is units. (Round to the nearest whole number.)EOQ, reorder point, and safety stock Alexis Company uses 937units of a product per year on a continuous basis. The product has a fixed cost of $44 per order, and its carrying cost is $4 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note: Use a 365-day year to calculate daily usage.) c. Determine the reorder point. d. Indicate which of the following variables change if the firm does not hold the safety stock: (1) order cost, (2) carrying cost, (3) total inventory cost, (4) reorder point, (5) economic order quantity.A printing company anticipates using 40,000 reams of paper at a uniform rate over the next year. Each time they place an order for X units of reams of paper, it is charged a flat fee of $200. Carrying costs are $4 per unit per year. A. use the formula for Economic Order Quantity to find out how many reams of paper they should purchase in each order. B. how many orders should they place over the year?
- Green Grass Industries Limited (GGIL) has used a fixed-time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs, are forcing GGIL, to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such a shortage costs. Table 10 is a random sample of 20 GGIL's items. Table 10. Annual Usage by Value of a sample of GGIL's Inventory Item Number Annual Usage ($) Item Number Annual Usage ($) 1 10,600 11 2,750 2 14,000 12 1,400 3 4,000 13 3,200 4 16,000 14 2,500 5 8,100 15 110,000 1,800 16 14,800 7 84,000 17 9,500 8. 890 18 1,700 9 940 19 3,700 10 94,000 20 12,500 a) What would you recommend GGIL to do to cut back its labor cost? (Illustrate using an ABC plan). b) Item 18 is critical to continued operations at GGIL. i. How would you recommend it be classified? ii. Give the reason(s) for your answer.You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 200 units and a standard deviation of 16 units. It is purchased from a wholesaler at a cost of $12.50 per unit. You are using a continuous review system to control this inventory. The supply lead time is 4 weeks. Placingan order costs $50, and the inventory carrying rate per year is 20 percent of the item’s cost. Your firm operates 5 days per week, 50 weeks per year.a. What is the optimal ordering quantity for this item?b. How many units of the item should be maintained as safety stock for 99 percent protection against stockouts during an order cycle?c. If supply lead time can be reduced to 2 weeks, what is the percent reduction in the number of units maintained as safety stock for the same 99 percent stockout protection?d. If through appropriate sales promotions, the demand variability is reduced so that the standard deviation of weekly…Golden Crust Bakery buys flour in 25-pound bags. The bakery uses an average of 1,215 bags ayear. Preparing an order and receiving a shipment of flour involves a cost of $10 per order.Annual holding costs are $75 per bag. Once an order for flour is placed, it takes six (6) days toreceive the order from the flour factory. The bakery operates 350 days per year.Calculate the following:(i) Economic Order Quantity(ii) Expected number of orders (Order Frequency)(iii) Average inventory(iv) The annual holding cost(v) The annual ordering cost(vi) The total annual cost of inventory management(vii) Reorder point(viii) If holding costs were to increase by $9 per year, how much would thataffect the minimum total annual cost?
- Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. In the second year, Fisk Corporation finds that it can reduce ordering costs to $1 per order, but carrying costs will stay the same at $1.50 per unit. a-1. What is the economic ordering quantity for the second year? Economic ordering quantity (EOQ) a-2. How many orders will be placed during the second year? Number of orders a-3. What will the average inventory be for the second year? Average inventory Total costs units units a-4. What is the total cost of ordering and carrying inventory for second year? LAA manufacturer buys cardboard boxes from a supplier. The annual demand is 40,000 boxes and is uniformly distributed. The boxes cost $5 each. The estimated order cost is $10, and the carrying cost rate is 20% per year. What is the EOQ and what is the annual order and carrying cost? How many times a year are orders placed, and what is the average time, in weeks, between orders? Using the answer from (b), if you round the average time between orders to the nearest week, what should the order quantity be? Would you recommend using this order quantity and time interval? Suppose that the actual demand turns out to be 80,000 boxes instead of 40,000 boxes.If you had used the EOQ from the (a), what would be the annual order and carrying cost be?Thompson Paint Company uses 60,000 gallons of pigment per year. The cost of ordering pigment is $200 per order, and the cost of carrying the pigment in inventory is $1 per gallon per year. The firm uses pigment at a constant rate every day throughout the year. a. Calculate the EOQ. b. If it takes 20 days to receive an order once it has been placed, determine the reorder point in terms of gallons of pigment. (Note: Use a 365-day year.)
- 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 IIt is your responsibility, as the new head of the automotive section of Nichols Department Store, to ensure that reorder quantities for the various items have been correctly established. You decide to test one item and choose Michelin tires, XW size 185 × 14 BSW. A perpetual inventory system has been used, so you examine this as well as other records and come up with the following data: Cost per tire $35 each Holding cost 20 percent of tire cost per year Demand 1,000 per year Ordering cost $20 per order Standard deviation of daily demand 3 tires Delivery lead time 4 days Because customers generally do not wait for tires but go elsewhere, you decide on a service probability of 98 percent. Assume the demand occurs 365 days per year. Determine the order quantity. Note: Round your answer to the nearest whole number. Determine the reorder point. Note: Use Excel's NORM.S.INV() function to find the z value. Round z value to 2 decimal places and final answer to the…Andy's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year to assemble Uediracs for sale. Tegdiws are used at a relatively constant rate but the use of Widgets vary with demand. Andy wants to improve his inventory management system and use either a "P" system or a "Q" system. What are the advantages and disadvantages of each system in this application and what information is needed to choose between them?