Question 1.  Westside Auto purchases a component used in the manufacture of automobile generators directly from the supplier.  Westside's generator production operation, which is operated at a constant rate, will require 1000 components per month throughout the year. (12,000 units annually).  Assume that the ordering cost are $25.00 per order, the unit cost is $2.50 per component, and the holding costs are 20% of the value of the inventory.  Westside has 250 working days per year and a lead time of 5 days. Answer the following questions:

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?

Question 2.  Suppose that the 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 $3.00.  Ordering costs are $20.00 per order and holding costs are 25% of the value of the inventory.  R&B has 250 working days per year, and the lead time is 5 days. Identify the following aspects of the inventory policy:

A.  Economic Order Quantity

B.  Reorder point

C. Cycle time

D. Total annual cost

Question 3.  Consider the following time series data:

Week: 1          2          3          4          5          6

Value:  18        13        16        11        17        14

Using the average of all the historical data as a forecast for the next period,k compute the following measures of forecast accuracy:

A. Mean absolute error

B. Mean Squared error

C. Mean absolute percentage error

D. What is the forecast for week 7?

Question 4. Nation Wide Bus Lines is proud of its six-week bus driver training program that it conducts for all Nation-Wide drivers.  As long as the class size remains less than or equal to 35 a six-week training program costs Nation Wide $22,000 for instructors, equipment, and so on.  The Nation-Wide training program must provide the company with approximately 5 new drivers per month.  After completing the training program, the new drivers are paid $1600 per month but do not work full time until a full-time driver position is open.  Nation-Wide views the $1600 per month paid to each idle new driver as a holding cost necessary to maintain a supply of newly trained drivers available for immediate service.  Viewing new drivers as inventory type units, how large should the training classes be to minimize Nation-Wide's total annual training and new driver idle time costs?  How many classes should the company hold each year?  What is the total annual cost associated with your recommendation?

Question 5.  Robert's Drugs is a drug wholesaler supplying 55 independent drug stores.  Roberts wishes to determine an optimal inventory policy for Comfort brand headache remedy.  Sales of Comfort are relatively constant as the past 10 weeks of data indicate.

Week     Sales (cases)        Week     Sales (cases)

                1                  110                     6                 120

                 2                 115                     7                 130

                 3                 125                     8                 115

                 4                 120                     9                 110

                 5                 125                   10                 130

Each case of Comfort costs Roberts $10 andRoberts uses a 14% annual holding cost rate for itsinventory.  The cost to prepare a purchase order forComfort is $12. What is Roberts' optimal orderquantity?

The lead time for a delivery of Comfort hasaveraged four working days.  Lead time has thereforebeen estimated as having a normal distribution with amean of 80 cases and a standard deviation of 10 cases.Roberts wants at most a 2% probability of selling outof Comfort during this lead time.  What reorder pointshould Roberts use?