# QUANTITATI 501- Chris Froome is a purchasing agent for a firm

1.) Chris Froome is a purchasing agent for a firm that sell components for high performance bicycles. One of the most popular components is the TDF bicycle frame which has an annual demand of 2,800 units. The cost of each frame is $570 and the inventory carrying cost is estimated to be 17% of the cost of each frame. Chris has made a study of the costs involved in placing an order for any of the frames the firm stocks, and he has concluded that the average ordering cost of $81.50 per order. Furthermore, it takes about one week for an order to arrive from the supplier, and the TDF operates 50 weeks per year.a)What is the annual ordering cost?b)What is the annual holding cost?c)How many orders (on average) would be placed per year?d)What is the average inventory?e)What is the reorder point?f)What is the EOQ?2.) Hiking Boots R Us is a local shoe store in Franklin. Annual demand for a popular hiking boot is 600 pairs per year, and Nairo Quintana, the owner of Hiking Boots R Us, has the habit of ordering 75 pairs of these hiking boots every time he places an order. Nairo estimates that the ordering cost is $25 and the cost of the hiking boots is $57.a)What is the annual ordering cost if the optimal ordering quantity is 75?b)What is the carrying cost (%) if the optimal ordering quantity is 75? (Enter real number- i.e. 12.5% should be entered as 12.5)c) What is the annual holding cost if the optimal ordering quantity is 75?d)What is the EOQ if carrying cost is 15%?3.) Floral Beauty, Inc., is a large floral arrangements store located in Asheville Mall. Bridal Lilies, which are a specially created bunch of lilies for bridal bouquets, cost Floral Beauty $17 each. There is an annual demand for 24,000 Bridal Lilies. The manager of Floral Beauty has determined that the ordering cost is $120 per order, and the carrying cost, as a percentage of the unit cost, is 16%. Floral Beauty is now considering a new supplier of Bridal Lilies. Each lily would cost only $16.50, but to get this discount, Floral Beauty would have to buy shipments of 3,000 Bridal Lilies at a time. Should Floral Beauty use the new supplier and take this discount for quantity buying?a)What is the EOQ for the current supplier?b)What is the annual ordering cost for the current supplier?c)What is the holding cost per unit per year for the current supplier?d)What is the total annual inventory cost (including purchase cost) for the current supplier? e)What is the annual holding cost for the new supplier (when purchasing 3,000 each order)? f)What is the total annual inventory cost (including purchase cost) for the new supplier (whenpurchasing 3,000 each order)?g)What should Floral Beauty do?4.) Andre Greipel is the owner of a small company that produces heart rate monitors. The annual demand is for 2,800 heart rate monitors, and Andre produces these devices in batches. On average, Andre can produce 150 monitors per day during the production process. Demand for monitors has been about 50 monitors per day. The cost to set up the production process is $600, and it costs Andre $0.75 to carry 1 monitor in inventory for one year. How many monitors should Andre produce in each batch?a)What is the optimal economic production quantity?b.)On average, how many setups are required per year?c.)What is the total cost per year (holding plus setup)?5.) Peter Sagan is in charge of maintaining hospital supplies at Champs Hospital. During the past year the mean weekly demand for a special type of tubing was 250 packages of this tubing with a standard deviation of 18 packages of tubing. The lead time for receiving this tubing from the supplier is 1.5 weeks. Peter would like to maintain a 95% service level and places an order for 750 packages every time an order is placed.a)How much safety stock should be used for a 95% service level?b)If the weekly demand is 250 and there is a 1.5 week lead time – what is the reorder point (95%service level)?c) How much safety stock should be used for a 99% service level?d)If the weekly demand is 250 and there is a 1.5 week lead time – what is the reorder point (99% service level)?e)If the carrying cost per year is $0.50/unit/year – what is the additional cost associate with the 99% service level compared to 95% service level (i.e. cost of safety stock at 99% level -cost of safety stock at 95% service level)?6.) Cavendish Convenience Stores purchases 1000 U.S. Road Maps a year for its inventory from its supplier, who offers pricing at quantity discounts. The cost for Cavendish to place an order is $42, and the annual carrying cost is 15%/year. What quantity should Cavendish order? The quantities and pricing from this supplier are shown in the following table:ORDER QUANTITYUNIT PRICE0-149$12.00150-349$11.70350-999$11.501000 or more$11.20 a)What is the EOQ when the unit price is $12?b)What is the total cost (holding + purchase+ ordering) when purchasing from the supplier wherethe unit price is $11.70?c)What is the total cost (holding + purchase+ ordering) when purchasing from the supplier wherethe unit price is $11.50?d)What is the total cost (holding + purchase+ ordering) when purchasing from the supplier wherethe unit price is $11.20?e)Based on the total costs, what quantity should be ordered from the supplier?}7.) The finished goods inventory of a small manufacturing company is shown below (available in Worksheet A7 of file Data for Module 6). Perform an ABC analysis on the data (Assign A items to a maximum of 70 % of the cumulative value and B items to a maximum of the next 20% of the cumulative value (a total of 90%).)SKU CodeUnit ValueDemand (units)1021 $125.00 1001204 $10.00 1,7501448 $12.00 2,0002144 $20.00 2002282 $17.00 3302456 $500.00 6752698 $25.00 853129 $5.00 2,5003141 $2.00 1,0003310 $1.00 1,5003312 $0.75 6253712 $8.00 2003943 $1.50 1254351 $0.75 4104682 $3.00 7004683 $1.00 1,2004991 $1,500.00 3205231 $20.00 6005940 $110.00 1205995 $50.00 1,5006466 $0.90 2006912 $8.00 1,2007006 $45.00 1,7007060 $3.00 3007087 $4.00 8007670 $2.00 758101 $10.00 6,0008447 $7.00 8008989 $6.00 5009034 $4.00 1,500a) How many items are assigned as “A” items?b.)How many items are assigned as “B” items?}c.) How many items are assigned as “C” items?d.) What assignment was made to the following items: 2456? 5995? 8989? 9034?