A department store is trying to decide how many JP Desksquirt II printers to order. Because JP is about to come out with a new model in a few months, the store will order only a limited number of model IIs. The cost per printer is $200, and each printer is sold for $230. If any model IIs are still in stock when the next model comes out, they will be sold for $150 apiece. If a customer wants a model II, and there are none left, the store will special order the printer at an extra cost (to the store) of $25. These printers are not in great demand. The store estimates that the number of model IIs that will be demanded during the next few months (before the next model comes out) is equally likely to be any value from 10 to 20, inclusive. According to the critical fractile method for a newsvendor model, how many printers should the store order?

A department store is trying to decide how many JP Desksquirt II printers to order. Because JP is about to come out with a new model in a few months, the store will order only a limited number of model IIs. The cost per printer is $200, and each printer is sold for $230. If any model IIs are still in stock when the next model comes out, they will be sold for $150 apiece. If a customer wants a model II, and there are none left, the store will special order the printer at an extra cost (to the store) of $25. These printers are not in great demand. The store estimates that the number of model IIs that will be demanded during the next few months (before the next model comes out) is equally likely to be any value from 10 to 20, inclusive. According to the critical fractile method for a newsvendor model, how many printers should the store order?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...

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Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
A restaurant uses 100 per week or 5,000 quart bottles of ketchup each year. The ketchup costs $3.00 per bottle and is served only in whole bottles because its taste quickly deteriorates. The restaurant figures that it costs $10.00 each time an order is placed, and holding costs are 20 percent of the purchase price. It takes 3 weeks for an order to arrive. The restaurant operates 50 weeks per year. The restaurant would like to use an inventory system that minimizes inventory cost. The restaurant has figured that the most economical order size or EOQ is approx. 409 (rounding up the decimals). Approximately, what is the time between two orders (in terms of weeks) 08 06 04 02 None of the above
A manufacturer has a production facility that requires 15,604 units of component JY21 per year. Following a long-term contract, the manufacturer purchases component JY21 from a supplier with a lead time of 7 days. The unit purchase cost is $25.6 per unit. The cost to place and process an order from the supplier is $121 per order. The unit inventory carrying cost per year is 10.5 percent of the unit purchase cost. The manufacturer operates 250 days a year. Assume EOQ model is appropriate. If the manufacturer uses a constant order quantity of 2,640 units per order, what is the annual holding cost? Use at least 4 decimal places.
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You are the manager of a retail store that sells home theater systems among other products. The weekly demand for these systems is 600. The warehouse you rent to store the inventory of home security systems charges you $8 per month for holding each unit of inventory. You buy these systems from a very reliable supplier for $250 per piece and sell each for $500 per piece. Each time you place an order to buy the systems from your supplier, you pay $416 as a fixed fee per order regardless of the quantity. Once the order is placed, the supplier takes exactly 1 week to deliver the order regardless of the quantity ordered. Please use this information to answer the following questions: a) What is the optimal order quantity (i.e. Economic Order Quantity OR EOQ - i.e. what quantity should be ordered per order) that would minimize the total annual ordering and holding costs? b) What is the ideal reorder level assuming no safety stock (i.e. the inventory level at which you should place the…
A large manufacturer purchases a part from a supplier under a continuous review system. The average demand is 400 units a day with a standard deviation of 50 units a day. It costs $55 to process each order. The holding cost for a part is $0.2 per month and the company has a policy of maintaining a 96% service level. The company operates 315 days per year. The time from when an order is placed to when it arrives at the company from its vendor is 5 days. a- What is the reorder point? b- What order quantity would be appropriate c- What is the total annual cost for this item?
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Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item’s current characteristics are:Demand 1D2 = 15,080 units/yearOrdering cost 1S2 = $125.00/orderHolding cost 1H2 = $3.00/unit/yearLead time 1L2 = 5 weeksCycle@service level = 95 percentDemand is normally distributed, with a standard deviation of weekly demand of 64 units.a. Calculate the item’s EOQ.b. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item.c. Which system requires more safety stock and by how much?
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General Motors is trying to determine how frequently they should have tires delivered to their Flint, Michign truck assembly plant. The tires are large and expensive to hold in inventory, and there is also a sgiicant fee each te a tire delivery is made. Which of the following tools would be most useful in making this decision O A/F Ratio Method Newsvendor Model Base Stock Model Economic Order Quantity Model Minimum Cycle Length Model