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Unformatted text preview: Chapter 12 CHAPTER 12 INVENTORY MANAGEMENT PROBLEMS P1. An automobile manufacturer uses about 60,000 pairs of bumpers (front bumper and rear bumper) per year, which it orders from a supplier. The bumpers are used at a reasonably steady rate during the 240 working days per year. It costs $3.00 to keep one pair of bumpers in inventory for one month, and it costs $25.00 to place an order. A pair of bumpers costs $150.00. a. Which inventory model should be used here: the basic EOQ, the EPQ, or the singleperiod model? How do you know? b. What is the annual carrying cost for any given order size of Q? c. What is the annual ordering cost for any given order size of Q? d. What is the total annual cost for any given order size of Q? e. What is the EOQ? f. What is the significance of the EOQ? g. What is the total annual expense of ordering the EOQ every time? h. How many orders will be placed per year? i. What is the total annual expense of ordering 600 pairs of bumpers every time? How much is saved per year by ordering the EOQ? P2. The Acme Bumper Co. manufactures bumpers for automobiles for one of the big three auto companies. About 60,000 pairs of bumpers (front bumper and rear bumper) are ordered by the auto company per year, at a price of $150.00 per pair. Pairs of bumpers are produced at a rate of about 400 per working day, and the company operates 240 days per year. The company manufactures other products, and it must set up the manufacturing system for a production order for pairs of bumpers, which costs $250.00. It costs $2.50 to store one pair of bumpers for one month. a. Which inventory model should be used here: the basic EOQ, the EPQ, or the singleperiod model? How do you know? b. What is the annual carrying cost for any given order size of Q? c. What is the annual ordering cost for any given order size of Q? d. What is the annual ordering cost for any given order size of Q? e. To minimize all relevant costs, how many bumpers should Acme manufacture each time it sets up to produce bumpers? f. What is the minimized total annual expense of producing bumpers? g. How many production runs will be required per year? h. What is the total annual expense of manufacturing 3,000 pairs of bumpers per production run? How much is saved per year by producing this amount? P3. Use the data from Problem P1 to solve this problem, in addition to the data below. The supplier offers a system of quantity discounts, as follows: Order Quantity Cost per Pair Discount 1 to 299 pairs $150.00 0% 300 to 499 pairs $150.00 4% 500 or more pairs $150.00 10% 164 Chapter 12 a. Which inventory model is appropriate here: the basic EOQ, the quantity discount model, or the singleperiod model? How do you know9 b. What is the total annual cost for any given order size Q less than 300 pairs?...
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 Spring '08
 WILLIAMCOSGROVE
 service level, ROP, EPQ

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