MBA6300onlineHomeworkAssignment#5InventoryControlModels

Instructions:Afterthestudentcalculatestheanswerstothishomeworkhe/shemustsubmitthe
answersbyplacingthemintheAssignment#_SubmittalLinkinBbbymidnightofthedate
shownintheCourseRoadmapandSyllabus.TheInstructordoesnotallowlatesubmissions
thereforeascoreofzero(0)willberecordedfortheassignmentifsubmittedaftermidnight
EasternTimeoftheduedate.SolutionsfortheassignmentwillbereleasedinBbthemorning
aftertheduedateforaccessbystudents.Totalpointsfortheassignmentis140.Note:Thereisno
partialcreditgiven;eithertheansweriscorrectorincorrect.
AfteryouhavesubmittedyouranswersintheAssignment#_SubmissionLink,uploadtheExcel
file(providedyoubytheInstructor)containingyouranswersandcalculationsintotheHome
Work#_SupportingDocumentationSubmissionlinkpriortotheduedateandtime.Asstatedin
thesyllabusascoreofzerowillbeawardedfortheassignmentifthisExcelfileisnotsubmitted.
NOTE:UNLESSEXPRESSLYSTATEDCARRYYOURANSWERSTOTWO(2)
DECIMALPLACES.
Task1.Awholesaledistributorstocksandsellslowflowtoiletstocontractorsforusein
commercialofficebuildings.Theestimatedannualdemandforthetoiletsis5,475units.The
estimatedaveragedemandperdayis18units.Thepurchasecostfromthetoiletmanufactureris
$135.00perunit.Theleadtimeforaneworderis5days.Theorderingcostis$90.00perorder.
Theaverageholdingcostperunitperyearis$4.05.Thedistributorhastraditionallyordered210
unitseachtimetheyplacedanorder.Baseduponusingthedistributorscurrentorderingmodel:
(5pointseachforatotalof25points)
Question1:Whatistheaveragenumberofunitsininventorybaseduponordering210unitseach
timeanorderisplaced?(5points)
Question2:Howmanyordersperyearwillbenecessarybaseduponordering210unitseach
timeanorderisplaced?Roundyouranswertotwodecimals.(5points)
Question3:Whatistheaveragedollarvalueofinventorybaseduponordering210unitseach
timeanorderisplaced?(5points)
Question4:Whatisthetotalannualcost(PurchaseCost+OrderingCost+HoldingCost)based
uponordering210unitseachtimeanorderisplaced?(5points)
Question5:Whatistheoptimalreorderpointbaseduponordering210unitseachtimeanorder
isplaced?(5points)

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Task2.ThepresidentofthewholesaledistributorhasrecentlyheardabouttheEOQmodeland
isinterestedinlearningwhetherornotusingthismodelwouldallowthecompanytoreduceits
annualcostsbyoptimizingthenumberofordersplacedeachyearandthenumberoftoilets
purchasedineachorder.Theestimatedannualdemandforthetoilets,estimatedaveragedemand
perday,purchasecostfromthetoiletmanufacturerperunit,leadtimeforaneworder,ordering
costperorderandaverageholdingcostperunitperyearremainthesameasstatedinthe
scenarioforthecurrentorderingmodel.BaseduponusingtheEOQmodel(withinstantaneous
receipt):(5pointseachforatotalof30points)
Question6:Whatistheeconomicorderquantity(EOQ)thatwillminimizeinventorycosts?(5
points)
Question7:HowmanyordersperyearwillbenecessarybaseduponusingtheEOQ?(5points)
Question8:Whatistheaveragenumberofunitsininventorybaseduponorderingusingthe
EOQ?(5points)
Question9:WhatistheaveragedollarvalueofinventorybaseduponorderingusingtheEOQ?
(5points)
Question10:Whatisthetotalannualcost(PurchaseCost+OrderingCost+HoldingCost)
baseduponusingtheEOQ?(5points)
Question11:WhatistheoptimalreorderpointbaseduponusingtheEOQ?(5points)
Task3.Thewholesaledistributorhastraditionallyrelieduponaninstantaneousreceiptmodelin
whichthematerialassociatedwitheachorderisreceivedinasinglebatch.Thetoilet
manufacturerhassuggestedtothepresidentofthewholesaledistributorthathemightwantto
consideragreeingtoacceptreceiptoforderedmaterialincrementallyoveraperiodoftimerather
thaninasinglebatchasameansforreducingtotalannualcosts.Thetoiletmanufacturerhas
advisedthathisfactorysdailyproductionrateis32toiletsandthesetupcostforeach
productionrunis$325.Theestimatedannualdemandforthetoilets,estimatedaveragedemand
perday,purchasecostfromthetoiletmanufacturerperunit,leadtimeforaneworder,ordering
costperorderandaverageholdingcostperunitperyearremainthesameasstatedinthe
scenarioforthecurrentorderingmodel.BaseduponusingtheEOQmodelwithout
instantaneousreceipt(a.k.a.,productionrunmodel):(5pointseachforatotalof35points)
Question12:Whatistheoptimalorderquantitywithoutinstantaneousreceipt?(5points)
Question13:Whatisthemaximumnumberofunitsininventorywithoutinstantaneousreceipt?
(5points)
Question14:Whatistheaveragenumberofunitsininventorywithoutinstantaneousreceipt?(5
points)

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Question15:Whatistheaveragedollarvalueofinventorywithoutinstantaneousreceipt?(5
points)
Question16:Whatisthetotalannualcost(i.e.,PurchaseCost+OrderingCost+HoldingCost)
withoutinstantaneousreceipt?(5points)
Question17:Whatistheoptimalreorderpointwithoutinstantaneousreceipt?(5points)
Question18:Howmanysetupsperyearwillbenecessarywithoutinstantaneousreceipt?(5
points)
Task4.Thetoiletmanufacturerhasproposedaquantitydiscountschedulefortoiletsasreflected
inthefollowingtableforconsiderationbythepresidentofthewholesaledistributorasameans
topotentiallyreducehistotalannualcosts.
DiscountNumber
1
2
3

QuantityOrdered
0to1,000
1,001to2,000
2,001andover

UnitCostDiscount
0%
12.5%
17.5%

Theestimatedannualdemandforthetoilets,estimatedaveragedemandperday,purchasecost
fromthetoiletmanufacturerperunit,leadtimeforaneworder,orderingcostperorderand
averageholdingcostperunitperyearremainthesameasstatedinthescenarioforthecurrent
orderingmodel.Baseduponusingthequantitydiscountmodel:(10pointseachforatotalof20
points)
Question19:Whatorderquantitywillallowthewholesaledistributortominimizetotalannual
inventorycosts(PurchaseCost+OrderingCost+HoldingCost)bytakingadvantageofthe
proposeddiscountpricing?(10points)
Question20:Whatisthetotalannualcost(PurchaseCost+OrderingCost+HoldingCost)
basedupontakingadvantageoftheproposeddiscountpricing?(10points)
Task5.Thepresidentofthewholesaledistributorisconcernedaboutthepossibilityofstockouts
causingalossofcustomerconfidenceandloyaltyandisinterestedinmaintainingsafetystockin
inventorytopreventpotentialstockouts.Baseduponusingthesafetystockmodels:(10points
eachforatotalof30points)
Question21:Assumingdemandisnormallydistributedwithameanof18unitsandastandard
deviationof4units,andaconstantleadtimeof5days,whatisthereorderpointnecessaryto
providea98%levelofservice?(10points)
Question22:Assumingdemandisconstantat18unitsperday,andleadtimeisnormally
distributedwithameanof5daysandastandarddeviationof2days,whatisthereorder
pointnecessarytoprovidea98%levelofservice?(10points)

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Question23:Assumingthatdemandisnormallydistributedwithameanof18unitsanda
standarddeviationof4units,andleadtimeisnormallydistributedwithameanof5daysand
astandarddeviationof2days,whatisthereorderpointnecessarytoprovidea98%levelof
service?(10points)

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