Practice Problems: Chapter 12, Inventory Management
Problem 1:
ABC Analysis
Stock Number
Annual
$
Volume
Percent of Annual $
Volume
J24
12,500
46.2
R26
9,000
33.3
L02
3,200
11.8
M12
1,550
5.8
P33
620
2.3
T72
65
0.2
S67
53
0.2
Q47
32
0.1
V20
30
0.1
Σ
= 100.0
What are the appropriate ABC groups of inventory items?
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View Full DocumentProblem 2:
A firm has 1,000 “A” items (which it counts every week, i.e., 5 days), 4,000 “B” items (counted
every 40 days), and 8,000 “C” items (counted every 100 days). How many items should be counted
per day?
Problem 3:
Assume you have a product with the following parameters:
Demand
= 360
Holding cost per
year
= 51.00
per unit
Order cos :
$100
t
=
per order
What is the EOQ?
Problem 4:
Given the data from Problem 3, and assuming a 300day work year; how many orders should be
processed per year? What is the expected time between orders?
Problem 5:
What is the total cost for the inventory policy used in Problem 3?
Problem 6:
Assume that the demand was actually higher than estimated (i.e., 500 units instead of 360 units).
What will be the actual annual total cost?
Problem 7:
If demand for an item is 3 units per day, and delivery leadtime is 15 days, what should we use for
a reorder point?
Problem 8:
Assume that our firm produces type C fire extinguishers. We make 30,000 of these fire
extinguishers per year. Each extinguisher requires one handle (assume a 300 day work year for
daily usage rate purposes). Assume an annual carrying cost of $1.50 per handle; production setup
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 Spring '10
 duane
 Normal Distribution

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