Inventory (8 problems)

North Manufacturing has a demand for 1,000 pumps each year. The cost of a pump is $50. It costs North Manufacturing $40 to place an order, and the carrying cost is 25% of the unit cost. If pumps are ordered in quantities of 200, North Manufacturing can get a 3% discount on the cost of the pumps. Should North Manufacturing order 200 pumps at a time and take the 3% discount?

Mark Achin sells 3,600 electric motors each year. The cost of these is $200 each, and demand is constant throughout the year. The cost of placing an order is $40, while the holding cost is $20 per unit per year. How many units should Mark order to minimize total inventory costs for the year?

Ken Ramsing has been in the lumber business for most of his life. Ken’s biggest competitor is Pacific Woods. Through many years of experience, Ken knows that the ordering cost for an order of plywood is $25 and that the carrying cost is 25% of the unit costs. Both Ken and Pacific Woods receive plywood in loads that cost $100 per load. Furthermore, Ken and Pacific Woods use the same supplier of plywood, and Ken was able to find out that Pacific Woods orders in quantities of 4,000 loads at a time. Ken also knows that 4,000 load is the EOQ for PacificWoods. What is the annual demand in loads of plywood for Pacific Woods?

Jersey Products offers the following discount schedule for its 4- by 8-foots sheets of good quality plywood:

Stockton College orders plywood from Jersey Products. Stockton College has an ordering cost of $45 and the annual carrying cost is 15% of the inventory value. If annual demand is for 100 sheets, what do you recommend?

If the company works 250 days per year, how many workdays between orders?

Jan Gentry is the owner of a small company that pro­duces electric scissors used to cut fabric. The annual demand is for 8,000 scissors, and Jan produces the scissors in batches. On the average, Jan can produce 150 scissors per day, and during the production process, demand for scissors has been about 40 scis­sors per day. The cost to set up the production process is $100, and it costs tan 30 cents to carry one pair of scissors for one year. How many scissors should Jan produce in each batch?

Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The annual demand for a particular stapler is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line for this is $25. There are 200 working days per year. The production rate for this product is 80 per day. How many units should Rolf produce each time he starts production of this product if he wishes to minimize total inventory cost (round answer to nearest unit)?

We use 2,750 per year of a certain subassembly that has a purchase cost of $450, and an annual holding cost of $500 per unit. Each order placed costs us $150. We operate 300 days per year and have found that an order must be placed with our supplier 6 working days before we can expect to receive that order. For this subassembly, find:

(a) Economic order quantity

(b) Annual holding cost (using EOQ)

(c) Annual ordering cost (using EOQ)

(d) Reorder point

The H.A.L. Computer Store sells a printer for $200. Demand for this is constant during the year, and annual demand is forecasted to be 600 units. The holding cost is $20 per unit per year, while the cost of ordering is $60 per order. Currently, the company is ordering 12 times per year (50 units each time) with a total annual ordering and holding cost of $1,400. There are 250 working days per year and the lead time is 10 days.

(a) Is the annual total order and holding cost more or less than the optimal?

(b) If the company decides to keep a safety stock equal to 5 units, what is the reorder point?