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Solutions to Chapter 9 Exercises

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Chapter 9: Inventory Management. 1. Solutions to Chapter 9 Exercises ... Ill-will Shortage Yes. Warehouse heat Holding Usually not. Advertising Holding* No ... – PowerPoint PPT presentation

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Title: Solutions to Chapter 9 Exercises


1
Solutions to Chapter 9 Exercises

2
Exercise 1
  • Expense Cost Type Relevant?
  • Postage Order Yes
  • Warehouse rent Holding Usually not
  • PO forms Order Yes
  • Secretarial labor Order Usually not
  • Warehouse Holding Usually not
  • Guard Holding Usually not
  • Interest Holding Yes
  • Cost of goods Holding Yes
  • Distribution Holding No
  • Receiving materials Order Yes
  • Ill-will Shortage Yes
  • Warehouse heat Holding Usually not
  • Advertising Holding No
  • Expediting Shortage Yes
  • Presidents salary Holding No
  • F.G. fire insurance Holding No
  • ___________________________
  • Part of cost of goods which must be held at
    some interest rate

3
Exercise 2
4
Exercise 3
3000 feet/month ? 12 36,000 feet/year
5
Exercise 4
6
Exercise 5
  • Q max level - on hand - on order
  • demand during lead time
  • 250 - 100 -250 10(15)
  • 50 units

7
Exercise 6
  • a.
  • b. (31,623)(12)/1,000,000 0.38 month
  • c. 31,623/1,000,000 0.0316 year (every 11.5
    days)
  • d. At EOQ annual holding cost annual ordering
    cost
  • (1,000,000)(100)/31,623 3162.30.
  • But ordering monthly 1,000,000/12
    83,333.33 per month.
  • New holding cost 83,333.33(0.2)/2 8333.33
  • New ordering cost 100(12) 1200 so the
    holding cost would
  • increase 5171 and the ordering cost would
    decrease 1962.30.
  • e.
  • Same for a doubling of the ordering cost or
    a halving of the
  • holding cost.
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