do questions 2,3, and 4
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2. a. The following table contains figures on the monthly volume and unit costs for a random sample of 16 items from a list of 2,000 inventory items at a health care facility. Develop an A-B-C classification for these items.
nem
Unit Cost
Usage
nem
Unit Cost
Usage
K34
$10
200
F99
K35
25
600
D45
550
K36
36
150
D48
90
M10
D52
110
M20
D57
120
Z45
200
N08
40
F14
300
P05
500
F95
800
P09
30
b. Given the monthly usages in the following table, classify the items in A, B, and C categories according to dollar usage.
Item
4021
9402
4066
6500
Usage
90
300
30
150
Unit cost
$1,400
9280
4050
80
700
20
TOLU
140
6850
3010
400
20
4400
5,000
c. Determine the percentage of items in each category and the annual dollar value for each category for part b.
3. A bakery buys flour in 25-pound bags. The bakery uses 1,215 bags a year. Ordering cost is $10 per order. Annual carrying cost is $75 per bag.
a. Determine the economic order quantity.
b. What is the average number of bags on hand?
c. How many orders per year will there be?
d. Compute the total cost of ordering and carrying flour.
e. If holding costs were to increase by $9 per year, how much would that affect the minimum total annual cost?
4. A large law firm uses an average of 40 boxes of copier paper a day. The firm operates 260 days a year. Storage and handling costs for the paper are $30 a year per box, and it costs approximately $60 to order and receive a shipment of paper.
Chapter Twelve Inventory Management
a. What order size would minimize the sum of annual ordering and carrying costs?
b. Compute the total annual cost using your order size from part a.
c. Except for rounding, are annual ordering and carrying costs always equal at the EOQ?
d. The office manager is currently using an order size of 200 boxes. The partners of the firm expect the office to be managed “in a cost-efficient manner.” Would you recommend that the office manager use the optimal order size instead of 200 boxes? Justify your answer.
