Register Number :

Name of the Candidate :

2112
P.G. DIPLOMA EXAMINATION, 2008
( MATERIALS MANAGEMENT )

( PAPER - II )

160. INVENTORY MANAGEMENT

May ] [ Time : 3 Hours

Maximum : 100 Marks

Answer any FIVE questions,

choosing THREE from PART – A
and TWO from PART – B.
All questions carry equal marks.

PART – A (3 × 20 = 60)

1. (a) Define inventory. (3)

(b) What is the need for maintaining inventory?

(5)

(c) Explain the factors that influences the

quantity of inventory to be maintained. (12)

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2. (a) Discuss the role of forecasting techniques

in inventory. (10)

(b) Write short notes on the following :

—
—
1 week

2 weeks
3 weeks
2 weeks
2 weeks
2 weeks
3 weeks
4 weeks
(i) Carrying cost.

Lead time
(ii) Ordering cost.

(iii) Over stock cost.

(iv) Stock out cost. (10)

—
—
—
—
—
—
—
—

3. (a) In what way, the empirical data and the

statistical distribution of demand and lead

100 units in week 2

100 units in week 3

Expected Receipt
time are useful while setting the stock levels.
Illustrate with example. (10)

(b) Write short notes on the following :

—
—
—

50
50
120
200
100
800
300

(i) Periodic Review system. (10)

(ii) Two Bin System. (10)

4. (a) Explain in detail about the two types of Inventory Stock

Replenishment system. (10)

(b) Illustrate the need for spare parts inventory

X
Y
A
B
C
D
E
F
G
H

and explain any one method of determining

the optimum number of spares. (10)
Component/Items
Compute the planned order release.
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(iv) Optimum period of supply per optimum

Quantity Unit Cost (Rs)
order. (10)
0 < q < 500 25·00
1
(b) An automobile manufacturing company is
500 < q < 1500 24·80
purchasing an item from outside suppliers. 2

Demand is 10,000 units per annum. Cost 1500 < q < 3000 24·60
3
of the item is Rs.5 per unit and procurement 3000 ≤ q 24·40
4
cost is estimated to be Rs.100 per order.
Cost of carrying inventory is 25%. If the
consumption rate is constant, determine 9. The following information is available about the
EOQ. group of 10 items. Classify the items into A,
B and C class items. (20)
In the above problem, if the company
decides to manufacture the above item with Item Annual Usage Price
an equipment which produce 100 units per 1001 3,000 100
day. The cost of units thus produced is 1002 28,000 150
Rs. 3·5 per unit, set up cost is Rs.150.
1003 300 100
Determine the quantity and discuss how the
answer is changed in the second case.(10) 1004 11,000 50
1005 400 50
8. Find the optimal order quantity for a product
1006 22,000 100
when the annual demand for the product is 500
units, the cost of storage per unit is 10% of 1007 1,500 50
the unit cost and ordering cost per order is 1008 8,000 50
Rs.180. The unit costs are given below. (20) 1009 6,000 150
1010 800 100

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10. A leading manufacturer in the city makes and 5. (a) W h a t a r e t h e i n p u t s f o r m a t e r i a l

sells items X and Y. The product details are requirements planning ? Explain the
as given. importance of each input. (10)

To make one “X” component, they require (b) Write the step by step procedure for the
two “A” items and three “B” items. formulation of cumulative value in ABC
analysis. (10)
To make one “A” item they require three “C”
items and four “D” items. 6. (a) With a neat block diagram, explain the
system components of MRP. (10)
To make one “Y” component, they require
two “E” items, one “D” item and three “F” items. (b) Why and how do you evaluate the inventory
performance ? What are the indices used
To make one “E” item, they require three “G”
to evaluate it ? (10)
items and four “B” items.
PART – B (2 × 20 = 40)
To make one “F” item, they require two “C”
items and Six “H” items. 7. (a) A manufacturer has to supply his customer
3600 units of his product per year.
Two hundred units of “X” and three hundred
Shortages are not permitted. Inventory
units of “Y” are to be shipped out during week
carrying cost amounts to Rs.1·2 per unit per
10. The current inventory position, the expected
annum. The set-up cost per run is Rs.80.
delivery of components and the lead time of the
Find :
items are as follows :
(i) Economic order quantity.

(ii) Optimum number of orders per annum.

(iii) Average annual inventory cost.

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