Inventory Problems Set 2

Inventory Problems Set 2 - Inventory Management 1 Full...

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Inventory Management 1. Full Court Press, Inc. buys slick paper in 1500 pound rolls for textbook printing. Annual demand is 1920 rolls. The cost per roll is $1000, the annual inventory carrying cost factor is 15 percent, and placing an order costs $250. (a) How many rolls should Full Court Press order at a time in order to minimize total annual cost? (b) What is the associated annual inventory carrying cost? annual ordering cost? total annual cost? (c) What is the annual item cost? (d) How long does an order last? (e) What is the time between orders? 2. Carol Philips is in charge of pharmaceutical suppliers at City General Hospital (CGH). During the past year, average forecasted daily demand for JY-25 bandages has been 20 cases. The forecast error standard deviation is 7.4 cases per day. The average lead time for this item is 10 days with a standard deviation of lead time of 1.8 days. The item cost is $140 per case, associated annual inventory carrying cost is 27% of the item cost, and ordering cost is $20. The Hospital has a targeted service level of 90% for these bandages. CGH is open 365 days per year. (a) What is the reorder point for the JY-25 bandages? (b) What is the total annual cost associated with Ms. Philip’s current policy of ordering 200 cases?
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