Discussion question

12.3
ABC classification is a ranking system for identifying and grouping items in terms of how useful
they are for achieving business goals. ABC classification is closely associated with the 80/20
rule, a business metric that proposes 80% of the outcomes are determined by 20% of the inputs

12.7
Price times quantity is not variable in the EOQ model but it is variable in the discount model. When
quantity discounts are available, the unit purchase price of the item depends on the order quantity.

12.10
Discount points below the EOQ have higher inventory costs, and the prices are no lower than at the
EOQ. Points above the EOQ have higher inventory costs than the corresponding price breaks or the EOQ
(it depends on whether there exists a discount point above the EOQ).

12.15
Safety stock is inventory beyond average demand during lead time, held to control the level of shortages
when demand and/or lead time are not constant; inventory carried to ensure that the desired service
level is reached.

12.16
1. Demand per unit of time.
2. Lead time.
3. Customer service level.
4. Standard deviation of demand.

12.17
Inventory in retail stores is monitored using a sing-period model, which is a system for ordering items
that have little or no value at the end of a sales period.

Problem

Problem12.21
Problem12.24
Problem12.27
From the above calculations, it is evident that Vendor B gives the least total
cost of $74.080.00 with order quantity of 500 valves.

Thus, Vendor B should be selected and the best order quantity for the
company is 500 valves.

Problem12.43

Based on the given data, we prepare a table in Excel as shown below:

As seen from above table, the least cost is for 300 units at $5000

Hence, this is the optimum stocking quantity.

Quantity without safety stock = 200

Safety Stock = Optimum stocking quantity - Quantity without safety stock =

300 - 200 = 100

Answer: 100 units

Problem12.49