Question 1: Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has estimated the annual demand for this model at 1,000 units. His cost to carry one unit is $100 per year per unit, and he has estimated that each order costs $25 to place. Using the EOQ model, how many should Ray order each time?
Assuming that the cost of logistics for an order is included in the order set-up cost (S), explain the impact of expedited but more costly transportation on this analysis ie. How might expedited transportation lower the total cost?
Question 2: Alpha Products, Inc., is having a problem trying to control inventory. There is insufficient time to devote all its items equally. Here is a sample of some items stocked, along with the annual usage of each item expressed in dollar volume.
Use an ABC inventory analysis.
ITEM ANNUAL DOLLAR USAGE ITEM ANNUAL DOLLAR USAGE
a $7,000 k $80,000
b 1,000 l 400
c 14,000 m 1,100
d 2,000 n 30,000
e 24,000 o 1,900
f 68,000 p 800
g 17,000 q 90,000
h 900 r 12,000
i 1,700 s 3,000
j 2,300 t 32,000
Can you suggest a system for allocating control time?
A) Specify where each time from the list would be placed.
B) Would ABC analysis using annual demand in units be a better analysis than using annual value?