Chapter 9: Inventory Management 1. Custom Computers, Inc. assembles custom home computer systems. The heat sinks ught for $12 each and are ordered in quantities of 1300 units. Annual demand is 5200 heat sinks, the annual inventory holding cost rate is $3 per unit, and the cost to place an order is estimated to be $50. Calculate the following: A. Economic order quantity B. Average inventory level C. The number of orders placed per year D. The total annual cost Solution: A. What is the order quantity that minimizes the distributor's total inventory-related costs? Demanda Order Cost= Holding Costs os B. What is the average inventory level that the distributor can expect? Average inventory= C. What is the expected number of orders that the distributor will place in a year? N=1 D. What is the inventory-related annual total cost? Total Annual Cost= 2. Bob's Burgers desires to control inventory levels so as to minimize the sum of holding and ordering costs. Bob estimates its inventory holding costs at $4/unit/year, and ordering cost at $50/order. Weekly demand is fixed at 200 units and Bob's Burgers operates 50 weeks per year. [Show your work]. A. What is the order quantity that minimizes the distributor's total inventory-related costs? Demand= Order Cost= Holding Costs Q = B. What is the expected number of orders that the distributor will place in a year? N= C. What is the average inventory level that the distributor can expect? Average inventory D. What is the inventory-related annual total cost? Total Annual Cost 3. A local nursery, Greens, uses 1560 bags of plant food annually. Greens works 52 weeks per year. It costs $10 to place an order for plant food. The annual holding cost rate is $5 per bag. Lead time is one week. A. Calculate the economic order quantity. B. Calculate the total annual costs. C. Determine the reorder point. Solution: A. What is the order quantity that minimizes the distributor's total inventory-related costs? Demand Order Cost= Holding Costu Q = B. What is the inventory-related annual total cost? Total Annual Cost= C. What should its ROP be? [HINT: Constant demand), Reorder Point, ROP= 4. A computer company that operates 250 days a year has an annual demand of 20,000 circuit boards. They want to determine EOQ for circuit boards which have an annual holding cost (H) of $10/unit, and an ordering cost (S) of $75. The purchasing lead time is 5 days. What is the TC and reorder point (ROP)? A. Calculate the economic order quantity. B. Calculate the total annual costs. C. Determine the reorder point. Solution: A. What is the order quantity that minimizes the distributor's total inventory-related costs? Demand Order Cost Holding Cost: Q = B. What is the inventory-related annual total cost? Total Annual Cost= C. What should its ROP be? [HINT: Constant demand), Reorder Point, ROP=