Identify the appropriate inventory model to obtain the optimal lot size for the
ID: 455600 • Letter: I
Question
Identify the appropriate inventory model to obtain the optimal lot size for the given problem description:
Q. A small grocery store sells fresh produce, which it obtains from a local farmer. During the strawberry season, demand for fresh strawberries can be reasonably approximated using a normal distribution with a mean of 40 quarts per day and a standard deviation of 6 quarts per day. The grocer purchases fresh strawberries daily from the local farmer for $1.5 per quart and sells them for $3.20 per quart. At the end of each business day, any remaining strawberries are sold to a producer of fresh juice for 50 cents.
Select one:
a. Fixed Interval
b. Single Period
c. EPQ
d. EOQ
e. ROP
Identify the appropriate inventory model to obtain the optimal lot size for the given problem description: Q. A produce distributor uses 800 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annual carrying cost of 35 percent of the purchase price per crate. Ordering costs are $28.
Select one:
a. Fixed Interval
b. Single Period
c. EPQ
d. EOQ
e. ROP
Question 3 Identify the appropriate inventory model to obtain the optimal lot size for the given problem description:
Q. Rick Jones is chairman of this years Walk for Diabetes event. Each year, the organizers of the event typically have commemorative T-shirts available for purchase by the entrants in the walk. Rick needs to order the shirts well in advance of the actual event. Based on past walks, the organizers have determined that the demand for T-shirts is normally distributed with a mean of 100 and a standard deviation of 10. Rick plans to sell the T-shirts for $20 each. He pays his supplier $8 for each shirt and can sell any unsold shirts for rags at $2 each. Determine how many T-shirts Rick should order to maximize his expected profits.
Select one:
a. Fixed Interval
b. Single Period
c. EPQ d. EOQ
e. ROP
Question 4 Identify the appropriate inventory model to obtain the optimal lot size for the given problem description:
Q. A drugstore places an order every fourteen days for many of the items it stocks. The manager of the drugstore wants a service level of 98%. The replenishment lead-time is 2 days. Average demand for one specific item is normally distributed with a mean of 40 units per day, and the standard deviation of demand is 3 units per day.
Select one:
a. Fixed Interval
b. Single Period
c. EPQ
d. EOQ
e. ROP
Q. The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 10,000 per day. FSF supplies hot dogs to regional restaurants at a steady rate of 5000 per day. The cost to prepare the equipment for producing hot dogs is $50. Annual holding costs are 50 cents per hot dog. The factory operates 300 days a year. What is the optimal run size? HINT: Make sure all the units of the parameters match.
Select one:
a. 1000
b. 141400
c. 707
d. 2000
e. 24495
Q. The home appliance department of a large department of store is using the re-order point inventory management system to control the replenishment of a particular model of CD players. The store sells an average of 10 CD players each week. Weekly demand follows a normal distribution with variance 4. Replenishment lead time is 16 weeks. What is the standard deviation of the demand during lead time? (recall from statistics that standard deviation is equal to the square root of variance and also that there are only rules for variances).
Select one:
a. 2
b. 8
c. 32
d. 64
Q. The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5000 per day. FSF supplies hot dogs to local restaurants at a rate of 250 per day. The cost to prepare the equipment for producing hot dogs is $66. Annual holding costs are 45 cents per hot dog. The factory operates 300 days a year. Which inventory model is applicable and why? HINT: Before you answer the question, think about and decide on whose perspective you are solving this problem from, the local restaurants or the FSF.
Select one:
a. EOQ since the restaurants order hot dogs from the FSF and the demand rate is constant and known for the hot dogs.
b. EPQ since the FSF is producing the hotdogs and selling them to restaurants and the production rate at the FSF far exceeds the demand rate for the hot dogs.
Q. Which one of the following factors is not considered when calculating holding cost per unit per unit time (H)?
Select one:
a. Opportunity Cost
b. Insurance
c. Depreciation
d. Rent
e. Demand
Q. A toy manufacturer uses approximately 32,000 slicon chips annually. The chips are used at a steady rate during the 240 days a year that the plant operates. Annual holding cost is $3 per slicon chip. The optimal ordering quantity is 1600 chips per order. What is the total holding (carrying) cost per year under the optimal inventory management policy?
Select one:
a. $3
b. $480,000
c. $2400
d. 3600
Q. A toy manufacturer uses approximately 32,000 slicon chips annually. The chips are used at a steady rate during the 240 days a year that the plant operates. Annual holding cost is $3 per slicon chip. The optimal ordering quantity is 1600 chips per order. What is the assumed ordering cost, i.e. S ?
Select one:
a. 120
b. 0.075
c. Enough information is not given.
d. 240
Explanation / Answer
Q1. B. single period. considering the perishable nature of product, this problem is same as that of newvendor problem. So single period order policy has to be used .
Q2. d EOQ. demand is fixed, carrying cost and ordering cost are fixed, so EOQ model is used.
Q3. Single period model is used.
Cu = 20-8 = 12, Co = 8-2 = 6.. Critical Ratio = Cu/(Cu+Co) = 0.6667. Z value corresponding to 0.6667 = 0.4307. Order Qty, Q = 100+10*0.4307 = 104
Q4. e. ROP. Demand is variable . Safety stock is required, and ROP model has to be used as order policy