What is the average inventory held

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Reference no: EM133751549

Inventory Management

Question-1
InstaCam sells 1200 cameras per year, and the demand pattern throughout the year is very steady. The store orders its cameras from a regional supplier at a cost of $250 each. Each time an order is placed, an ordering cost of $125 is incurred. Holding costs are about 8.33% of the cost of the item annually. Currently, InstaCam orders cameras every quarter - i.e, in quantities of 300 units.
a. For the current ordering policy(10 pts)
1. What is the average inventory held? (2 pts)
2. What is the number of orders placed annually? (4 pts)
3. What is the total annual cost of holding and ordering? (4 pts)
b. What is the economic ordering quantity - that minimizes the sum of holding and ordering costs?(5 pts)
c. For the EOQ(12 pts)
1. What is the average inventory held? (2 pts)
2. What is the number of orders placed annually? (4 pts)
3. What is the number of days between orders? Assume InstaCam works 300 days a year. (2 pts)
4. What is the total annual cost of holding and ordering? (2 pts)
5. How much does InstaCam save by switching from the current order quantity to the EOQ? (2 pts)
d. Suppose the supplier has a lead time of 5 days. What reorder level should InstaCam use?(3 pts)
e. If InstaCam places an order of at least 150 cameras each time it orders, the supplier will reduce the price of each camera by $5. Should InstaCam use an order quantity of 150 units in order to get this discount? Calculate all costs and savings and make a recommendation.(10 pts)

Question-2
HappyNY is an Internet order business that sells one popular New Year greeting card once a year. The cost of the paper on which the card is printed is $0.05 per card, and the cost of printing is $0.15 per card. The company receives $2.15 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Its customers are from all over the country; demand is normally distributed with mean8,000 and standard deviation 1500.
(Each question below is worth 5 points.)
a. What is the cost of an unsold greeting card?
b. What is the cost of a "shortage", i.e., not having a card when there is demand for it?
c. What is the critical fractile for HappyNY? What does this mean?
d. What is the optimal order quantity for the New Year greeting card?
e. If HappyNY uses the quantity in (d), what is the risk it is taking of a shortage?
f. A market research survey is able to reduce the standard deviation of demand to 1000 cards. What is the effect of this on the optimal order quantity?

Reference no: EM133751549

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