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Question 1: Holding Costs

4 points

In inventory models, if holding costs are high, then high inventory levels
desired.
False

4 points

One of the basic purposes of inventory analysis in manufacturing and

stockkeeping services is to determine how large the orders to vendors
should be.
True

4 points

The fixed-order quantity inventory model is more appropriate for

important items such as critical repair parts because there is closer
monitoring and therefore quicker response to a potential stockout.
True

Question 4: EOQ

6 points

If annual demand is 41345 units, the ordering cost is \$7 per order and
the holding cost is \$5 per unit per year, what is the optimal order quantity
using the fixed-order quantity model? Please round to a whole number.
(2*41345*7/5)^1/2

Question 5: How much to order?

6 points

Ray's Satellite Emporium wishes to determine the best order size for its
best-selling satellite dish. Ray has estimated the annual demand for this
model at 952 units. His cost to carry one unit is \$100 per year per unit,
and he has estimated that each order costs \$27 to place. How many should
Ray order each time? Please round to a whole number.
(2*952*27/100)^1/2

Question 6: Quantity Discount

Demand for an item is 1000 units per year. Each order placed costs \$10.
The annual cost to carry items in inventory is \$2 each.

Part a: 3 points

In what quantities should the item be ordered? Please round to a whole

number.
(2*1000*10/2)^1/2

Part b: 5 points

What is the total annual inventory cost (not including purchase cost)?
Q/2*H+D/Q*S=100*2/2+(1000/100)*10=200

Part c: 6 points

Supposing a \$100 discount on each order is given if orders are placed in

quantities of 500 or more. If orders are placed in quantities of 500, what
is the total annual inventory cost (not including purchase cost)?
500/2*2+1000/500*10-2*100＝320

Question 7: All-Units Discounts

Demand for an item is 18199 units per year. Each order placed costs \$111.
The annual carrying cost percentage per item in inventory is 18% each.
The variable purchase cost is \$2.50 per unit if less than 3000 units will
be ordered, \$2.40 from 3000 units upto (but not including 4000 units),
and \$2.30 for at least 4000 units. These are all-units discounts.

Part a: 3 points

What is the optimal order quantity Q* for the unit cost of \$2.30? Please
round to a whole number.
[2*18199*111/(0.18*2.3)]^1/2＝3123.92

Part b: 2 points
Is this quantity realizable/feasible?
No

Part c: 5 points

What is the optimal realizable/feasible total annual cost at a unit cost

of \$2.30?
111*18199/4000+2.3*18199+4000/2*0.18*2.3=43190.72225

Part d: 3 points

What is the optimal order quantity Q* for the unit cost of \$2.40? Please
round to a whole number.
[2*18199*111/(0.18*2.4)]^1/2=3058.147

Part e: 2 points

Yes

Part f: 5 points

What is the optimal realizable/feasible total annual cost at a unit cost

of \$2.40?
T(Q=3058.147)=2.4*18199+18199/(3058.147)*111+(3058.147)/2*0.18*2.4=44998.
71956

Part g: 3 points

What is the optimal order quantity Q* for the unit cost of \$2.50? Please
round to a whole number.
[2*18199*111/(0.18*2.5)]^1/2=2996.36

Part h: 2 points

yes
Part i: 5 points

What is the optimal realizable/feasible total annual cost at a unit cost

of \$2.50?
=2.5*18199+18199/(2996.36)*111+(2996.36)/2*0.18*2.5=46845.86201

Question 8: Incremental Discounts

Demand for an item is 632 units per year. Each order placed costs \$8. The
annual carrying cost percentage per item in inventory is 21% each. The
variable purchase cost is \$0.30 per unit if less than 500 units will be
ordered, \$0.29 from 500 units upto (but not including 1000 units), and
\$0.28 for at least 1000 units. These are incremental discounts.

Part a: 3 points

What is the optimal order quantity Q* for the first price interval (0.30)?
Please round to a whole number.
[2*513*3/(0.20*0.3)]^1/2=401

Part b: 2 points

Is this quantity realizable/feasible?

Yes

Part c: 4 points

What is the optimal order quantity Q* for second price interval (0.29)?
Please round to a whole number.
519

Part d: 2 points

Is this realizable/quantity feasible?

Yes

Part e: 5 points

What is the optimal order quantity Q* for third price interval (0.28)?
Please round to a whole number.
703

Part f: 2 points
Is this quantity realizable/feasible?