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12 - Arrow Space Inc manufactures specialized ceramic...

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Unformatted text preview: Arrow Space, Inc, manufactures specialized ceramic components used in the aerospace industry. The company’s materials and parts manager is currently revising the inventory policy for XL-20, one of the chemicals used in the production process. The chemical is purchased in lO—pound canisters for $95 each. The firm uses 4,800 canisters per year. The controller estimates that to place and receive a typical order bf XL~20 costs $150. The annual cost of storing XL—20 is $4 per canister. [ff], Required Write the formula for the total annual cost of ordering and storing XL-ZO. Use the EOQ formula to determine the optimal order quantity. What is the total annual cost of ordering and storing XL—ZO at the economic order quantity? How many orders will be placed per year? Arrow Space’s controller, Jane Tumbull, recently attended a seminar on JIT purchasing. Afterwards she analyzed the cost of storing XL-ZO, including the costs of wasted space and inef— ficiency. She was shocked when she concluded that the real annual holding cost was $ 19.20 per canister. Tumbull then met with Doug Kaplan, Arrow Space’s purchasing manager. Together they contacted Reno Industries, the supplier of XL-20, about a JIT purchasing arrangement. After some discussion and negotiation, Kaplan concluded that the cost of placing an order for XL—20 could be reduced to just $20. Using these new cost estimates, Tumbull computed the new EOQ for XL-ZO. (1) Use the equation approach to compute the new EOQ. _(2) How many orders will be placed per year? 9 =- a 1:" E“ W glider to the original data given in the preceding problem for Arrow Space, Inc. quired Prepare a table showing the total annual cost of ordering and storing XL-ZO for each of the follow- ing order quantities: 400, 600, and 800 canisters. ' What are the weaknesses in the tabular approach? {fer to the original data given in Problem 1550 for Arrow Space, Inc. quired epare a graphical analysis of the economic order quantity decision for XLZO. diet to the original data given in Problem 15.50 for Arrow Space, Inc. The lead time required to receive Assuming stable usage of XL-20 each month, determine the reorder point for XL—ZO. ésuppose that the monthly usage of XL-ZO fluctuates between 300 and 500 canisters, although §nnual demand remains constant at 4,800 canisters. What level of safety stock should the materials and parts manager keep on hand for XL-ZO? What is the new reorder-point for the chemical? ...
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