stat week 9
sbatniji
week_9.docx1-Purpose
To assess your ability to describe the principles of inventory control.
Action Items
1. Complete Discussion Questions 6-1 and 6-2 on page 238 in Quantitative Analysis. Completely answer the questions in a one- to two-page composition format.
6-1
Why is inventory an important consideration for managers?
6-2
what is the purpose of inventory control?
2- Purpose
To assess your ability to calculate economic order quantity (EOQ) and re-order point (ROP).
Action Items
2. Review Case 6-21 in Chapter 6 of Quantitative Analysis.
3. Completely answer the following questions listed at the end for the problem exercise:
Compute the EOQ.
Compute the ROP.
Compute the optimal number of orders per year.
Compute the total annual cost for Western valves.
6-21
Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time the demand per week for West valves is approximately 80.
(a) What is the EOQ?
(b) What is the ROP?
(c) What is the average inventory? What is the annual holding cost?
(d) How many orders per year would be placed? What is the annual ordering cost?
