Grantham University West Valve Company Annual Ordering Cost Report

Complete the following problems from the textbook.

Chapter 6: problems 23; 36; 45

Submit answers in a single, tabbed Excel file with the answer to each problem on a separate tab of the worksheet. The answer file should be submitted to the dropbox for assignment 4.

#23

Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Fur-thermore, it takes about two weeks for an order to arrive from the supplier, and during this time, the de-mand per week for West valves is approximately 80.

(a) What is the EOQ? (b) What is the ROP? (c) Is the ROP greater than the EOQ? If so, how is this situation handled?

(d) What is the average inventory? What is the an-nual holding cost?

(e) How many orders per year would be placed? What is the annual ordering cost?

#35

Lisa Surowsky was asked to help in determining the best ordering policy for a new product. Currently, the demand for the new product has been projected to be about 1,000 units annually. To get a handle on the carrying and ordering costs, Lisa prepared a series of average inventory costs. Lisa thought that these costs would be appropriate for the new prod-uct. The results are summarized in the following ta-ble. These data were compiled for 10,000 inventory items that were carried or held during the year and were ordered 100 times during the past year. Help Lisa determine the EOQ.

GO TO EBOOK PAGE 229 TO SEE THE CHART

#45

The Hardware Warehouse is evaluating the safety stock policy for all its items, as identified by the SKU code. For SKU M4389, the company always orders 80 units each time an order is placed. The daily demand is constant, at 5 units per day; the lead time is normally distributed, with a mean of three days and a standard deviation of two days. Holding cost is $3 per unit per year. A 95% service level is to be maintained.

(a) What is the standard deviation of demand during the lead time?

(b) How much safety stock should be carried, and what should be the reorder point?

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