1. Consider a basic economic order quantity (EOQ) model with the following chara
ID: 3309937 • Letter: 1
Question
1. Consider a basic economic order quantity (EOQ) model with the
following characteristics:
Item cost: $15.
Item selling price: $20.
Monthly demand: 500 units (constant)
Annual holding cost: 9% of purchase cost
Cost per order: $18.
Order lead time: 5 days
Firm's work year: 300 days (50 weeks @ 6 days per week)
Safety stock: 15% of monthly demand
1
Q* the optimal order quantity and reorder point.
a)
500 and 175
b)
400 and 100
c)
400 and 175
d)
400 and 75
e)
none of the above
2
M, the maximum quantity in inventory.
a)
575
b)
475
c)
500
d)
675
e)
none of the above
3
T, the cycle time.
a)
20 workdays
b)
15 workdays
c)
32 workdays
d)
25 workdays
e)
none of the above
4
Total annual inventory cost.
a)
$90,540.00
b)
$540.00
c)
$675.00
d)
$90,641.25
e)
none of the above
5
What is the annual ordering cost?
a)
$18.00
b)
$270.0
c)
$1,080.00
d)
$216.00
e)
none of the above
6
Suppose the vendor demands purchases in multiples of 500 only.
What is the increase in total annual inventory cost that this causes?
a)
$13.50
b)
$0.0
c)
$337.50
d)
$67.50
e)
none of the above
7
What is the average lead time demand?
a)
100
units
b)
16
units
c)
8
units
d)
75
units
e)
none of the above
8
If the standard deviation of the lead time demand is 10 units,
what is the cycle service level with the given safety
a)
100%
b)
95%
c)
99%
d)
75%
e)
none of the above
9
If the standard deviation of the lead time demand is 10 units,
what would be the safety stock if cycle service level is 99%?
a)
75
b)
175
c)
123
d)
100
e)
none of the above
10
Assuming cycle service level of over 99% is not advisable,
what is the annual cost of carrying un-necessary safety stock?
a)
$ 70.20
b)
$ 1,350.00
c)
$ 414.00
d)
$ 1,800.00
e)
none of the above
1
Q* the optimal order quantity and reorder point.
a)
500 and 175
b)
400 and 100
c)
400 and 175
d)
400 and 75
e)
none of the above
2
M, the maximum quantity in inventory.
a)
575
b)
475
c)
500
d)
675
e)
none of the above
3
T, the cycle time.
a)
20 workdays
b)
15 workdays
c)
32 workdays
d)
25 workdays
e)
none of the above
4
Total annual inventory cost.
a)
$90,540.00
b)
$540.00
c)
$675.00
d)
$90,641.25
e)
none of the above
5
What is the annual ordering cost?
a)
$18.00
b)
$270.0
c)
$1,080.00
d)
$216.00
e)
none of the above
6
Suppose the vendor demands purchases in multiples of 500 only.
What is the increase in total annual inventory cost that this causes?
a)
$13.50
b)
$0.0
c)
$337.50
d)
$67.50
e)
none of the above
7
What is the average lead time demand?
a)
100
units
b)
16
units
c)
8
units
d)
75
units
e)
none of the above
8
If the standard deviation of the lead time demand is 10 units,
what is the cycle service level with the given safety
a)
100%
b)
95%
c)
99%
d)
75%
e)
none of the above
9
If the standard deviation of the lead time demand is 10 units,
what would be the safety stock if cycle service level is 99%?
a)
75
b)
175
c)
123
d)
100
e)
none of the above
10
Assuming cycle service level of over 99% is not advisable,
what is the annual cost of carrying un-necessary safety stock?
a)
$ 70.20
b)
$ 1,350.00
c)
$ 414.00
d)
$ 1,800.00
e)
none of the above
Explanation / Answer
SOLUTION :-
Given Item cost = $15, Item selling price = $20 ,Monthly demand = 500 units (constant) ,
Annual holding cost = 9% of purchase cost, Cost per order = $18 ,Order lead time = 5 days
Firm's work year = 300 days
Annual Demand = 500 * 12 = 6000, Annual Holding cost = 15 * 9% = $1.35
(1)
Q* the optimal order quantity and reorder point
Answer :- (b) 400 and 100
(2)
Maximum quantity in inventory is
Answer :- $475
(3)
Total cycle time is
Answer :- 20 days
(4)
Total Inventory cost is
Answer :- $540
(6)
The increase in total annual inventory cost that this causes is
Answer :- $13.5
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