Carl's Computers

SOM 464 HOMEWORK PROBLEMS R. Gunther

Fall 2010 Set #5

Inventory Control

1. ABC, Inc. has five items in work-in-process (WIP) inventories. The unit usage and costs for each item is shown below:

Item Unit Usage Unit Cost

1 1000 $ 1

2 20 10

3 150 2

4 400 4

5 200 3

Determine which items fall into A, B, and C categories.

2. Classy Furniture, Inc. maintains raw materials inventories of various furniture components. The ten items currently in stock range in value from wood components to nuts and bolts. The usage and cost of the ten items is shown below:

Item Unit Usage Unit Cost

1 300 $1.00

2 2800 1.50

3 30 1.00

4 1100 0.50

5 40 0.50

6 2200 1.00

7 150 0.50

8 800 0.50

9 600 1.50

10 80 1.00

Classify the items into A, B, and C categories.

3. Joe the plumber has gone into the designer plunger business. He buys basic plungers from a well-known supplier in Washington D.C. and customizes them. He maintains a huge raw materials plunger inventory in Defiance, Ohio. Demand averages about 1,000 items per month; holding costs per month are 50% of purchase costs; and order costs are $30. Joe buys plungers for $12. How much and how often should Joe order? Determine total relevant costs.

4. The CSUN bookstore is ordering copies of a new book, "How to Retire in Style" by Mangelo Ozilo, former CEO of Citywide Bank. Demand for the texts is expected to average 500 books per month. Holding costs are $.05 per book per month and order costs are $2. Determine the order size and total relevant costs.

5. Suppose that total holding costs per year are half...