Reference no: EM13880765
Practice Problems: Inventory Management
Problem 1:
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ABC Analysis
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Stock Number
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Annual $ Volume
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Percent of Annual $ Volume
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J24
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12,500
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46.2
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R26
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9,000
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33.3
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L02
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3,200
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11.8
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M12
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1,550
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5.8
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P33
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620
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2.3
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T72
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65
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0.2
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S67
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53
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0.2
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Q47
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32
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0.1
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V20
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30
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0.1
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S = 100.0
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What are the appropriate ABC groups of inventory items?
Problem 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:
Annual Demand = 360 units
Holding cost per year = $1.00 per unit
Order cost = $100 per order
What is the EOQ for this product?
Problem 4:
Given the data from Problem 3, and assuming a 300-day 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:
Based on the material from Problems 3 - 5, what would cost be if the demand was actually higher than estimated (i.e., 500 units instead of 360 units), but the EOQ established in problem 3 above is used? What will be the actual annual total cost?
Problem 7:
If demand for an item is 3 units per day, and delivery lead-time is 15 days, what should we use for a simple re-order 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 cost of $150, and a daily production rate of 300. What is the optimal production order quantity?
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