Assignment – Inventory Management Problem

(Jacobs & Chase, 14th ed., p. 551)

41. Alpha Products, Inc., is having a problem trying to control inventory. There is insufficient
time to devote to all its items equally. Here is a sample of some items stocked, along with
the annual usage of each item expressed in dollar volume.

Item Annual $ Usage Item Annual $ Usage

a $30,200
b 27,000
c 93,100
d 1,500
e 1,900
f 30,100
g 1,700
h 2,600
i 3,300
j 1,600
k $1,800
l 20,100
m 111,100
n 3,100
o 600
p 114,100
q 2,700
r 28,100
s 2,900
t 3,200

a. Can you suggest a system for allocating control time?

b. Specify where each item from the list would be placed.

27. Sarah’s Muffler Shop has one standard muffler that fits a large variety of cars. Sarah wishes
to establish a reorder point system to manage inventory of this standard muffler. Use the
following information to determine the best order size and the reorder point.

Annual demand 5,600 mufflers Ordering cost $40 per order

Standard deviation of 5 mufflers per Service probability 90%
daily demand working day
Item cost $50 per muffler Lead time 3 working days
Annual holding cost 35% of item value Working days 300 per year