For Personal Use

Questions:

Page 585

1.Distinguish between dependent and independent demand in a McDonald’s, in an integrated manufacturer of personal copiers, and in a pharmaceutical supply house.

An independent demand at McDonald’s will be the demand of Chicken nuggets, fried shrimps French fries. The dependent demand will be things like the meat that goes in the burger or the eggs that are used for the breakfast meals, as they are dependent on the number of burgers or breakfast meals sold.

In the case of the integrated manufacturer of personal copiers, the demand for which the number of copiers is forecasted is independent and the integrated parts (raw materials etc) will be dependent.

A pharmaceutical supply house, will act as a supplier because they will not be producing anything. Therefore the independent and dependant demand will be the same, which will be the invoice of the pharmaceuticals.

2.Distinguish between in-process inventory, safety stock inventory, and seasonal inventory.

In-process inventory: Items that are currently in the process of being produced.

Safety-stock inventory is the inventory that is carried by a firm to meet the needs of a maximum demand level.

Seasonal inventory is that inventory that is collected to meet periodic increases in demand i.e. Christmas, Halloween etc.

4 . Under which conditions would a plant manager elect to use a fixed-order quantity model as opposed to a fixed-time period model? What are the disadvantages of using a fixed-time period ordering system?

Fixed-order quantity models Fixed-time period models

• Used when there are very expensive items, high costs

• Orders from different places • Used when low costs, inexpensive items

• Orders from same sources

Disadvantages:

Cannot operate with a perpetual count like the fixed order, needs to be counted regularly.

Requires more attention than the fixed-order quantity system

8.Which type of inventory system would you use in the following situations?

a....