BUS3500 Operations Management _ Assignment 2

Hanson College _ Winter 2021 1

Unit 3: Inventory Management

Q1. Short Answers

1. Distinguish between in-process inventory, safety stock inventory, and seasonal inventory

2. Discuss the nature of the costs that affect inventory size.

3. What two basic questions must be answered by an inventory-control decision rule?

4. Which type of inventory system would you use in the following situations?

a. Supplying your kitchen with fresh food.

b. Obtaining a daily newspaper.

c. Buying gas for your car.

To which of these items do you impute the highest stockout cost?

Q2. The local supermarket buys lettuce each day to ensure really fresh produce. Each morning any lettuce

that is left from the previous day is sold to a dealer that resells it to farmers who use it to feed their

animals. This week the supermarket can buy fresh lettuce for $4.00 a box. The lettuce is sold for $10.00

a box and the dealer that sells old lettuce is willing to pay $1.50 a box. Past history says that tomorrows

demand for lettuce averages 250 boxes with a standard deviation of 34 boxes. How many boxes of

lettuce should the supermarket purchase tomorrow?