L. Houts Plastics is a large manufacturer of injection-molded plastics in North Carolina. An investigation of the company's manufacturing facility in Charlotte yields the information presented in the table below. How would the plant classify these items according to an ABC classification system?
L. Houts Plastics Charlotte Inventory Levels
Item Code # Average Inventory (units) Value ($/unit)
1289 400 3.75
2347 300 4
2349 120 2.5
2363 75 1.5
2394 60 1.75
2395 30 2
6782 20 1.15
7844 12 2.05
8210 8 1.8
8310 7 2
9111 6 3
problems 1
William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics:
Demand D = 19,500 units/year
Ordering cost S = $25/order
Holding cost H = $4/unit/year
a) Calculate the EOQ for the workbooks.
b) What are the annual holding costs for the workbooks?
c) What are the annual ordering costs?
problems 2
Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units. Southeastern estimates its annual holding cost for this item to be $25 per unit. The cost to place and process an order from the supplier is $75. The company operates 300 days per year, and the lead time to receive an order from the supplier is 2 working days.
a) Find the economic order quantity.
b) Find the annual holding costs.
c) Find the annual ordering costs.
d) What is the reorder point?
Problems 3
M. Cotteleer Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of the components has an annual demand of 250 units, and this is constant throughout the year. Carrying cost is estimated to be $1 per unit per year, and the ordering cost is $20 per order.
a) To minimize cost, how many units should be ordered each time an order is placed?
b) How many orders per year are needed with the optimal policy?
c) What is the average inventory if costs are minimized?
d) Suppose that the ordering cost is not $20, and Cotteleer has been ordering 150 units each time an order is placed. For this order policy (of Q = 150) to be optimal, determine what the ordering cost would have to be.