Homework

Problems

Note: PX means the problem may be solved with POM for Windows and/or Excel OM.

Problems 12.1–12.6 relate to Managing Inventory

• • 12.1 L. Houts Plastics is a large manufacturer of injection-molded plastics in North Carolina. An investigation of the company’s manufacturing facility in Charlotte yields the information presented in the table below. How would the plant classify these items according to an ABC classification system? PX

L. Houts Plastics’ Charlotte Inventory Levels

ITEM CODE #	AVERAGE INVENTORY (UNITS)	VALUE ($/UNIT)
1289	400	3.75
2347	300	4.00
2349	120	2.50
2363	75	1.50
2394	60	1.75
2395	30	2.00
6782	20	1.15
7844	12	2.05
8210	8	1.80
8310	7	2.00
9111	6	3.00

• • 12.9 Henry Crouch’s law office has traditionally ordered ink refills 60 units at a time. The firm estimates that carrying cost is 40% of the $10 unit cost and that annual demand is about 240 units per year. The assumptions of the basic EOQ model are thought to apply.

a. For what value of ordering cost would its action be optimal?

b. If the true ordering cost turns out to be much greater than your answer to (a), what is the impact on the firm’s ordering policy?

• • 12.15 Joe Henry’s machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets:

Annual demand:	2,500
Holding cost per bracket per year:	$1.50
Order cost per order:	$18.75
Lead time:	2 days
Working days per year:	250

a. Given the information, what would be the economic order quantity (EOQ)?

b. Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?

c. Given the EOQ, how many orders would be made each year? What would be the annual order cost?

d. Given the EOQ, what is the total annual cost of managing the inventory?

e. What is the time between orders?

f. What is the reorder point (ROP)? PX