1) Ye’ Olde Barrel Shop sells oak barrels to a local winery. The Master Cooper would like to reduce her oak lumber inventory by determining the optimal number of oak boards to order. The annual demand averages 55,000 boards and the order cost is $21.00 per order. Holding cost is estimated to be 40%. The purchase cost of each board is $14.00. The standard deviation of daily demand is 5 boards. The standard deviation of lead time is 3.0 days. Assume 268 days in the year and an average lead time of 7 days.
If a service level of 98% is desired during the reorder interval, what is the reorder point? Remember you cannot order partial units, round to the nearest whole unit in the LAST step.
2) Brady Jones is a manager at a local store that sells computers. He needs to decide how many computers to order based on the quantity discount schedule below. Annual demand is 9,000 computers, annual inventory carrying cost as a percent of unit cost is 20% (due to problems with obsolescence), and ordering costs are $45 per order.
Quantity Price per Unit ($)
1-199 1,300.00
200-499 1,297.00
500+ 1,295.00
What is Optimal Total Annual Cost?
3) Brady Jones is a manager at a local store that sells computers. He needs to decide how many computers to order based on the quantity discount schedule below. Annual demand is 9,000 computers, annual inventory carrying cost as a percent of unit cost is 20% (due to problems with obsolescence), and ordering costs are $45 per order.
Quantity Price per Unit ($)
1-199 1,300.00
200-499 1,297.00
500+ 1,295.00
What what order quantity should Brady use to minimize TAIC? If necessary, round your final answer to the nearest whole number.
4) Annual demand for an item is 12,000 units. The holding cost rate is 20% of the item cost. Ordering costs are $8 per order. Quantity discounts are available according to the schedule below:
Quantity Price per Unit ($)
1-99 130.00
100-299 128.00
300-399 127.00
400+ 126.25
From the previous problem, what is the total annual cost of your policy?
5) Annual demand for an item is 12,000 units. The holding cost rate is 20% of the item cost. Ordering costs are $8 per order. Quantity discounts are available according to the schedule below:
Quantity Price per Unit ($)
1-99 130.00
100-299 128.00
300-399 127.00
400+ 126.25
Assume 52 5-day weeks per year. If the lead-time is 3 weeks, what should the reorder point be? If necessary, round your final answer UP to the nearest whole number.
6) Annual demand for an item is 16,000 units with the cost per unit at $440. The holding rate is 8% and the order cost is $21.00 per order. The standard deviation of daily demand is 2 units. Assume 263 work days in the year and a lead-time of 7 days. If a service level of 98% is desired during the reorder interval, what is the reorder point? (Note: Due to rounding and your exact choice of z, your answer may be a few units off the choices given.)