1. ABC Analysis-
A distributor of building supplies sells a line of designer trim to small construction companies. The line is described in the table below:
|
Item
|
Annual Demand
|
Value ($/Unit)
|
|
1245
|
48
|
$5.50
|
|
2137
|
52
|
$4.75
|
|
5879
|
185
|
$3.55
|
|
4258
|
732
|
$4.35
|
|
9873
|
215
|
$3.25
|
|
6891
|
75
|
$7.50
|
|
4281
|
550
|
$3.75
|
|
1597
|
95
|
$8.00
|
|
3541
|
334
|
$4.95
|
|
7413
|
488
|
$2.50
|
|
9512
|
92
|
$5.50
|
|
5921
|
110
|
$5.25
|
|
4832
|
214
|
$3.95
|
|
2218
|
12
|
$9.50
|
|
9867
|
45
|
$8.75
|
A) Show how this line would be classified using an ABC system.
B) Explain how this company will use the information developed from the ABC analysis.
2. Cylce Counting
Leemin Enterprises carries 9,000 items of outdoor garden décor. It's owner, Peter Ng, uses an ABC classification system. 7% of the items are classified as A. 33% of the items are classified as B. The remaining items are classified as C. Peter wants his operations staff to count the A items monthly, the B items quarterly, and the C items semi-annually. Leemin uses 20 days per month for calculations.
How many items of each classification and in total need to be counted each day?
3. EOQ
Guy's BBQ Grille in Saskatoon serves 5,000 steaks per year. The steaks are kept in a freezer. The holding cost for each steak is $1.50. The cost to place an order is $45. The lead time is 4 days and there are 250 working days per year.
i) What is the optimal order quantity (EOQ)?
ii) What is the average inventory? Hint: Use the EOQ calculated in i).
iii) What is the annual inventory holding cost?
iv) How many orders would be placed each year?
v) What is the annual ordering cost?
vi) What is the total annual cost to manage the inventory?
vii) How many days on average are there between orders?
viii) What is ROP?