- 1)[10 points] List the types of inventory. Explain each type in 1-2 sentences.
- 2)[10 points] What are types of inventory costs? What is the tradeoff between inventory carrying costs and ordering costs?
- 3)[10 points] Explain a situation in which you experienced a stockout. What did you decide to do in that situation? How can stockout costs be calculated?
- 4)[10 points] What are the differences between a fixed order quantity and fixed order interval system. Which one generally requires more safety stock? Why? Explain in a paragraph about 150-200 words.
- 5)[10 points] A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. Assume that the lead time for the EOQ model is appropriate. What is the cost-minimizing order quantity? What is the total annual inventory (holding and ordering) costs? Show all calculations to earn credit.
- 6)[10 points] A department store sells 10,000 units of handbags per year. The store orders handbags from a manufacturer. Each time an order is placed, an ordering cost of $40 is incurred. The store pays $30 for each handbag. The holding cost of $1 of inventory is 25 cents per year. (i.e. inventory holding rate is 25%). What is the economic order quantity? Show all calculations to earn credit.
- 7)[30 points] A firm that assembles electronic circuits has an average demand of 125,000 units per year. However, the demand is stochastic (i.e. it can change over the time). To meet with the variability in demand, the management has decided to keep a safety stock that is worth of 3 days demand.
- a)What is the economic order quantity?
- b)What is the required safety stock?
- c)What is the reorder point?
- 8)[10 points] What is vendor managed inventory (VMI)? Provide few examples of VMI. How does vendor-managed inventory differ from traditional inventory management? Explain in a paragraph about 150-200 words.
Each time an order is placed, a setup cost of $200 is incurred. Holding cost per item is $0.50 per unit per year. The lead time for the electronic circuits is 5 days. (Assume that the firm works for 250 days per year).
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