Competency 309.3.1: Decision Making Models A – A1. Economic Order Quantity Model (EOQ) The Economic Order Quantity Model will allow an organization to determine the optimal volume of inventory to order at a given time. The EOQ model provides the most optimized approach to inventory ordering as it considers‚ demand‚ ordering cost‚ and holding costs; to develop the volume of inventory to be ordered to maintain to minimum annual cost (Render‚ 2012). Equation: Variables: Q* = optimal number to order
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ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Barabas EOQ Model or Barabas Formula. The model was developed by Ford W. Harris in 1913‚ but R. H. Wilson‚ a consultant who applied it extensively‚ is given credit for his in-depth analysis EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for
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$1.00‚ then the optimal order quantity (EOQ) for napkins would be a. 62‚500 boxes b. 10‚000 boxes *c. 5‚000 boxes d. 2‚500 boxes Calculate the EOQ‚ Q* =sqrt [(2*D*CO )/CC] = sqrt [(2*62500*200)/1] = 5000 5. A restaurant currently uses 62‚500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the optimal (EOQ) number of boxes each time an order is placed
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Chapter 7 Supply Chain Management _______ Types of inventory * By stages of production and value added * Raw materials (RM) * Work-in-progress (WIP) * Finished goods (FG) * They’re not equally costly * Finished goods are more valuable * They need to be managed differently * By function * Cycle stock (working stock): amount of inventory that you expect to sell * Safety stock (buffer stock): amount of inventory that you don’t expect to
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1) The manager of an automobile repair shop hopes to achieve a better allocation of inventory control efforts by adopting an A-B-C approach to inventory control. a) Given monthly usages in the following table‚ classify the items in A‚ B and C categories according to dollar usage: Item Usage Unit Cost 4021 90 $1‚400 9402 300 12 4066 30 700 6500 150 20 9280 10 1‚020 4050 80 140 6850 2‚000 10 3010 400 20 4400 5‚000 5 a) In descending order: Item Usage x Cost 4021 $126‚000
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problems: the EG151 exhaust gasket and the DB032 drive belt. CASE: PARTS EMPORIUM • Either a continuous review system (Q system) or a periodic review system (P system)‚ for two inventory items. • Enough information is available to determine the EOQ and R for a continuous review system – P and T for a periodic review system • Because stockouts are costly relative to inventory holding costs‚ a 95% cycle-service level is recommended. CASE: PARTS EMPORIUM • Inventory holding costs are 21%
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1) Meeting the needs of the present without compromising the ability of future generations to meet their needs is known as corporate social responsibility. Answer: False 2) Internet-based technologies today allow consumers‚ communities‚ public interest groups‚ and regulators to be well informed about an organization’s performance. Answer: True 3) What does CSR stand for? A) consumer sustainability requirements B) critical sustainability ratio C) corporate social responsibility D) corporate sustainability
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The EOQ model assumes goods are not subject to discounts for bulk ordering and where the specific demand and lead time are known for a particular product. Timing of orders is critical to ensuring no stock outs happen‚ even during unplanned events and seasonal
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report will highlight the problems that A&F has been experiencing since 1992 as a result of the clear vision of the CEO‚ Michael Jeffres‚ which was to reinvent the brand as well as implementing a strategic plan to create a segmented target market (Blanchard‚ 2014). Furthermore‚ this report will address the question whether the company should continue with the current segmenting strategy or should it widen its clothing selection to appeal to a greater number of potential consumers?
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Parts Emporium Aaron Lee 1. EG151 Exhaust Gasket D(21 weeks) = 2142 D(annual) = 5304 H= (12.99)(1-0.32)(0.21)= 1.85 EOQ= 338 gaskets placed 15.68 times per year Cost of ordering = (15.68)($20) =$313.60 Average cycle inventory = 338/2= 169 gaskets Standard deviation = 2.86 gaskets Associated z value for 95% confidence = 1.65 Safety stock = 4 gaskets Reorder point = 208 gaskets Total holding costs = $312.65 In conclusion‚ Parts Emporium should order 338 gaskets whenever current inventories reach
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