Operations and Supply Chain Management The Core

390 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
35. Demand for a book at Amazon.com is 250 units per week. The product is supplied
to the retailer from a factory. The factory pays $10 per unit, while the total cost
of a shipment from the factory to the retailer when the shipment size is Q is
given by
​Shipment cost = $50 + 2Q​
Assume the annual inventory carrying cost is 20 percent.
a. What is the cost per shipment and annual holding cost per book?
b. What is the optimal shipment size?
c. What is the average throughput time?
36. Palin’s Muffler Shop has one standard muffler that fits a large variety of cars.
The shop wishes to establish a periodic review system to manage inventory of
this standard muffler. Use the information in the following table to determine the
optimal inventory target level (or order-up-to level).
Annual demand 3,000 mufflers Ordering cost $50 per order
Standard deviation of 6 mufflers per Service probability 90%
daily demand
working day
Item cost $30 per muffler Lead time 2 working days
Annual holding cost 25% of item value Working days 300 per year
Review period 15 working days
a. What is the optimal target level (order-up-to level)?
b. If the service probability requirement is 95 percent, the optimal target level
[your answer in part (a)] will (select one):
I. Increase.
II. Decrease.
III. Stay the same.
37. Daily demand for a certain product is normally distributed with a mean of 100
and a standard deviation of 15. The supplier is reliable and maintains a constant
lead time of 5 days. The cost of placing an order is $10 and the cost of holding
inventory is $0.50 per unit per year. There are no stock-out costs, and unfilled
orders are filled as soon as the order arrives. Assume sales occur over 360 days of
the year.
Your goal here is to find the order quantity and reorder point to satisfy a
90 percent probability of not stocking out during the lead time.
a. What type of system is the company using?
b. Find the order quantity.
c. Find the reorder point.
38. A particular raw material is available to a company at three different prices,
depending on the size of the order:
Less than 100 pounds
$20 per pound
100 pounds to 1,000 pounds $19 per pound
More than 1,000 pounds
$18 per pound
The cost to place an order is $40. Annual demand is 3,000 units. The holding (or
carrying) cost is 25 percent of the material price.
What is the economic order quantity to buy each time?
39. CU, Incorporated (CUI) produces copper contacts that it uses in switches and
relays. CUI needs to determine the order quantity, Q, to meet the annual demand