# Management Science

| April 22, 2014

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Suppose that R & B Beverage Company has a soft drink product that shows a constant annual demand rate of 3600 cases. A case of the soft drink costs R & B \$3. Ordering costs are \$20 per order and holding costs are 25% of the value of the inventory. R & B has 250 working days a year and the lead time is 5 days. Identift the following aspects of the inventory policy
A. Economic order quantity
B. Reorder point
C. Cycle time
D. Total annual cost
The reorder point is defined as the lead time demand for an item. In cases of long lead times, the lead time demand and thus the reorder point may exceed the economic order quantity. In such cases, the inventory position will not equal the inventory on hand when an order is placed and the reorder point may be expressed in terms of either the inventory position or the inventory on hand. Consider the economic order quantity model with D=5000 Co = \$32 Ch=\$2 and 250 working days per year. Identify the reoder point in terms of the inventory position and in terms of the inventory on hard for each of the following lead times.
A 5 days
B 15 days
C 25 days
D 45 days
Westside Auto purchases a company used in the manufacture of automobile generators directly from the supplier. Westside’s generators production operation which is operated a constant rate will require 1000 components per month throughout the year ( 12,000 units annually) Assume that the ordering costs are \$25 per order the unit cost is \$2.50 per Compton and annual holding costs are 20% of the value of the inventory. Westsides has 260 working days per year and a lead time of 5 days.
A. what is the EOQ for this component?
B. What is the reorder point?
C. What is the cycle time?
D. What are the total annual holding and ordering costs associated with your recommended EOQ?
6. Tele Reco is the new specialty store that sells tvs sets video recorders video games and other tv products. A new Jap manufactured videotape recorder costs tele reco \$600 per unit. Tele Reco annual holding cost is 22% order costs are estimated to be \$70 per unit.
A. If demand for the new videotape recorder is expected to be constant with a rate of 20 units per month, what is the recommended order quantity for the videotape recorder?
B. What are the estimated annual inventory holding and ordering costs associated with the product?
C. How many orders will be placed per year?
D. With 250 working days per year, what is the cycle time for the product?
9. Cress Electronic products manufactures component used in the automotive industry. Cress purchases parts for use in its manufacturing operations from a variety of suppliers. One supplier provides a part where the assumptions of the EOQ model are realistic. The annual demand is 5000 units , the ordering costs are 80 per order and the annual holding cost rate is 25%
A. If the cost or part is \$20 per unit what is the economic order quantity?
B. Assume 250 days of operation per year. If the lead time for an order is 12 days, what is the reorder point?
C. If the lead time for the parts is seven weeks, (35 days) what is the reorder point?
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