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Inventory management

18. Ian Gentry is the owner of a small company that produces electric scissors used to cut fabric. The annual demand is for 8000 scissors, and Ian produces the scissors in batches. On the average, Ian can produce 150 scissors per day, and during the production process, demand for scissors has been about 40 scissors per day. The cost to set up the production process is $100, and it costs Ian 30 cents to carry one pair of scissors per year.

What assumption is NOT met in this problem for the basic EOQ model?
A. demand is known and constant
B. The lead time is constant
C. the receipt of inventory is instantaneous
D. the only variable costs are ordering cost and holding cost

19. What is the optimal number of production runs for Jan to minimize her expenses with these costs and demands?
A. 1
B. 2
C. 3
D. 4

20. What is Jan's maximum inventory?
A. 2697
B. 8000
C. 1978
D. not enough information is provided to obtain this

21.What is Jan's average inventory?
A. 4000
B. 989
C. 150
D. 2697

Solution Preview

Hi,

Please see response to your posting as follows.

Annual demand, D = 8000
Production rate, P = 150
Daily demand, d = 40
Production setup cost or ordering cost, S = $100
Inventory ...

Solution Summary

Solution shows calculations of: 1. Economic ordering quantity 2 .Maximum inventory 3. The average inventory.

$2.19