1. For the fiscal year ended Jan.

2016, Wal-Mart Stores Inc (WMT) reported annual

sales of $482.13 billion, year-end inventory of $44.47 billion, and annual cost of goods
sold of $360.98 billion.

Required:

a. Compute Inventory Turnover

b. Compute Days of inventory on hand.

Answer:

Its inventory turnover for the year equals:

a. $360.98 billion ÷ $44.47 billion = 8.12 times

b. Its days inventory equals:

365 days /8.12 = 45 days

2. If Jenjen printers’ cost to order is P108, the cost to carry an item in inventory is P75
; and if the company requires 5000 cans of ink during the year, what is the quantity of
cans of ink they should order to minimize the cost that they will incur?

Answer:

2 X 5000 X 108
EOQ = √
75

1080000
=√
𝟕𝟓

= √14400

= 120
3. Demand for rug-cleaning machines at Clyde’s U-Rent-It is shown in the following
table. Machines are rented by the day only. Profit on the rug cleaners is $10 per day.
Clyde has four rug-cleaning.

Demand Frequency

0 .30

1 .20

2 .20

3 .15

4 .10

5 .05

1.00

Service level must have been between .15 and .05

Assuming that Clyde’s stocking decision is optimal, what is the implied range of
excess cost per machine?

Answer:`

Cs/Cs + Ce = .15, so Ce = $10-$1.5

Solving you find Ce = $8.5

Similarly
Cs/Cs + Ce = .05, so Ce = $10-$0.5
Solving you find Cs= $9.5
Hence the apparent range of shortage cost is $8.5 and $9.5.
4. The Dine Corporation is both a producer and a user of brass couplings. The firm
operates 220 days a year and uses the couplings at a steady rate of 50 per day.
Couplings can be produced at a rate of 200 per day. Annual storage cost is $2 per
coupling, and machine setup cost is $70 per run.

a. Determine the economic run quantity.

b. Approximately how many runs per year will there be?
c. Compute the maximum inventory level.
d. Determine the run time and cycle time.

Answer:
D = 50 x 220 = 11,000 units per year

S = $70 per order

H = $2 per unit per year

p = 200 units per day

u = 50 units per day

a. Determine the economic run quantity.

2DS 𝑝
𝑄𝑝 = √ √
𝐻 𝑝−𝑢

2(11,000)70 200
𝑄𝑝 = √ √
2 200 − 50

𝑄𝑝 = 1,013.24 units ≈ 1,013 units

b. Approximately how many runs per year will there be?

Number of runs per year = D / Qp

= 11,000/1013
 = 10.86 ≈ 11 runs

c. Compute the maximum inventory level.

Imax = (Qp / p) (p-u)

= (1,013 / 200) (200 - 50)
= 759.75 or 760 units

d. Determine the run time and cycle time.

Run time = Qp / p
= 1,013 / 200
= 5.065 days

Cycle time = Qp / u
= 1,013 / 50
= 20.26 days

5. Quantity Discount Model

D= 4775 S= ? H= 0.5 P

Range Unit Price H

1-339 $ .9 0.5 (.9) = 0.45
400-699 $ .85 0.5 (.85) = 0.425
700 or more $ .8 0.5 (.8) = 0.4

Using 775 as minimum quantity, what is the total cost?

Answer:

𝑴𝒊𝒏𝒊𝒎𝒖𝒎 𝑷𝒐𝒊𝒏𝒕 = √𝟐𝑫𝑺 ÷ 𝑯

7752 = √(2 × 4775)S÷ 0.4

600625= (2 × 4775 × 𝑆) ÷ 0.4

25.157= 𝑆

25≈ 𝑆

Total cost=Carrying cost + 𝑂𝑟𝑑𝑒𝑟𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 + 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡

=(775 ÷ 2)0.4 + (4775 ÷ 775)25 + 0.8 × 4775

=155 + 154 + 3820

=$4129

6. A lab orders a number of chemicals from the same supplier every 30 days. Lead
time is five days. The assistant manager of the lab must determine how much of one
of these chemicals to order. A check of stock revealed that eleven 25-milliliter (ml)
jars are on hand. Daily usage of the chemical is approximately normal with a mean
of15.2 ml per day and a standard deviation of 1.6 ml per day. The desired service
level for this chemical is 95 percent. How many jars of the chemical should be
ordered?

Answer:

From the problem, we can get the following data:

d̅ = 15.2 ml per day

𝜎𝑑 = 1.6 ml per day

OI = 30 days

LT = 5 days

SL = 95 percent requires z = 1.65

A = 11 jars x 25 ml per jar = 275 ml

Amount to oder = Expected demand during protection interval + Safety Stock +
Amount on hand at reorder time

Amount to oder = d̅ ( OI + LT ) + 𝑧𝜎𝑑 √( OI + LT ) - A

Expected demand
during protection
̅ ( OI + LT)
= d
interval

= 15.2 (30 + 5)

= 532 painkillers

Safety stock = 1.65 (1.6)√(30 + 5)

= 15.61845063 painkillers

Amount to oder = 15.2 (30 + 5) + 1.65(1.6)√(30 + 5) – 275 = 272.62 ml

The problem asked is how much jars to order so we need to convert the 272.62
ml to jars:

272.62 ml
= 10.90 or 11 jars
25 ml per jar

7. Mang Kepweng operates a business that sells painkillers. He orders painkillers

from the same supplier every 16 days. Orders are received 10 days after placing an
order. The previous inventory count revealed that there are 428 painkillers on hand.
Each painkiller costs $40 and has no salvage value. He charges his customers $800
each unit of painkiller. Daily demand for the painkiller is 42 per day and a standard
deviation of 3.8 per day. What is the desired service level for this pain killer? How
many pieces should be ordered?

From the problem, we can get the following data:

d̅ = 42 per day

𝜎𝑑 = 3.8 per day

OI = 16 days

LT = 10 days

A = 428 painkillers

Amount to oder = Expected demand during protection interval + Safety Stock

+ Amount on hand at reorder time

Amount to oder = d̅ ( OI + LT ) + 𝑧𝜎𝑑 √( OI + LT ) - A

760
Desired service level = 760+40 = .95

The z for this desired service level is 1.65

Expected demand
during protection
̅ ( OI + LT)
= d
interval

= 42 (16 + 10)

= 1092

Safety
= 1.65 (3.8)√(16 + 10)
 stock

= 31.97085235

Amount to oder = 42 (16 + 10) + 1.65(3.8)√(16 + 10) – 428 = 695.9 or 696

painkillers