S09-HW Soln-Ch12

# S09-HW Soln-Ch12 - Chapter 12 Managing Inventories Homework...

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Chapter 12: Managing Inventories Homework Problems and Solutions Problem #1: The Welsh Corporation uses 10 key components in one of its manufacturing plants. Perform an ABC analysis from the data shown below. Explain your decisions and logic. SKU Item Cost \$ Annual Demand WC219 0.10 12,000 WC008 1.20 22,500 WC916 3.20 700 WC887 0.41 6,200 WC397 5.00 17,300 WC654 2.10 350 WC007 0.90 225 WC419 0.45 8,500 WC971 7.50 2,950 WC713 10.50 1,000 Problem #2: The following table contains figures on the monthly volume and unit costs for a random sample of 16 items from a list of 2,000 inventory items at a health care facility. Develop an A-B-C classification for these items. Item Unit Cost Usage K34 10.00 200 K35 25.00 600 K36 36.00 150 M10 16.00 25 M20 20.00 80 Z45 80.00 200 F14 20.00 300 F95 30.00 800 F99 20.00 60 D45 10.00 550 D48 12.00 90 D52 15.00 110 D57 40.00 120 N08 30.00 40 P05 16.00 500 P09 10.00 30 fdaeeff974466d3f705e803c616b09ee443310d4.doc 1

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Chapter 12: Managing Inventories Homework Problems and Solutions Problem #3: A large bakery buys flour in 25-pound bags. The bakery uses an average of 4,860 bags a year. Preparing an order and receiving a shipment of flour involves a cost of \$10 per order. Annual holding costs are \$75 per bag. a. Determine the Economic Order Quantity? b. What is the average number of bags on hand? c. How many orders per year will there be? d. Compute the total costs of ordering and holding flour. e. If order costs were to increase by \$1 per order, how much would that affect the minimum total annual cost? Problem #4: Garden Variety Flower Shop uses 750 clay pots a month. The pots are purchased at \$2 each. Annual carrying costs per pot are estimated to be 30 percent of costs, and ordering costs are \$20 per order. The manager has been using an order size of 1,500 flower pots. a. what additional annual cost is the shop incurring by staying with this order size? b. Other than cost savings, what benefit would using the optimal order quantity yield? Problem #5: The friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5,000 per day. FSF supplies hot dogs to local restaurants at a steady rate of 250 per day.
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## This note was uploaded on 10/19/2009 for the course IDS IDS302 taught by Professor Rainer during the Spring '09 term at Institute of Business Administration.

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S09-HW Soln-Ch12 - Chapter 12 Managing Inventories Homework...

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