~NG 343 EXAM 3A April 18, 2006

30 Questions: 20 p~oblems worth 4 points each and 10 questions worth 2 points each.

1. __
__b_7_7 What is the Economic Order Quantity (EOQ) for the Lanier Mfg Co.? The Lanier
Manufacturing Company purchases part Al 00 to use in their assembly process. They have a monthly demand of
1,500 units, The ordering cost = $70. Days per year that the company works = 250. The carrying cost rate = .22.
The unit cost = $25.
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2.
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v I\. What is the Economic Production Order Quantity (POQ) for the Widget Company? The co.
is experiencing problems with the manufacture of part Cll1. The forecast for unit sales is 60,000 for next year.
The production rate used in the factory is 400 parts per day. The Ordering cost is $75 per order. The factory works
250 days per year. Inventory Carrying Cost is .30. The Unit Cost for part Clll = $100.

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3. SC!tlf:J. ~!a~ is savings or loss in total costs for the year if the co. accepts the 5% reduced price? Given:
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The Big Bear Co. has the opportunity to purchase part XYZ (monthly usage is 200) at a 5 percent reduction if they
order in lot size of 1,200. Note: indicate savings with a (+) and a loss with a (-). Present unit cost = $35,
ordering cost = $75 per order, present lot size = fixed order quantity = 200, and the carrying cost rate = .25.

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 Given: John Marshall, Material Manager for the Yellow Bird Co. was able to produce the exact amount of product
and sales in year 2004 as in year 2005 with only 90% of the monthly Average Inventory Value he had in 2004. The
'Average Inventory Value" for the company in 2004 was $1,000,000. The carrying cost rate for the company for both
years was/45>, ...--

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YjOvOO I f What is the savings (+) or loss (-) in the year 2005 inventory carrying costs?
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Given: The Blue Duck Co. had a monthly average inventory for the year 2005 of $24 million. They make three
products. They have determined other company costs for the year 2005:

Warehouse Rent $900,000 Obsolescence $240,000

Taxes on inventory $100,000 Warehouse storage racks $500,000
Cost of capital $3,000,000 -Factory lent .~
InsuraI).ce on inventory $60,000 Pilferage, Spoilage $200,000
Warehouse labor $500,000 F-mooase--costfor-compooents ·-$-50&;00&'
<\00000 .
What is the expected inventory carrying cost rate (k) for year 2005? -----------
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Given: The Ritz Manufacturing Company makes one product Parts X. The selling price, Unit Cost and the number of
units sold for year 2005 is shown in the table below. Total investment = Average Inventory plus $100, 000 for equipment
and cash. Fixed Costs = $1,000,000. AVG. Monthly Inventory = $800,000.

Part Price
DC
Sold
$60
$50
$35
$45
50,000
40,000 CoS
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1/75 C;O 110
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6. What is the Inventory Turns (IT) for the year 2005? (1 decimal)

7. What is the Return on Investment (ROI) for the year 2005? (1 decimal)

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Given: The Red Dog Co. orders 200 part ABCl each time they order. The annual demand is 2400 units. The company
works 240 days a year.

d. LO ['0 {) (A) What is the number of days between purchase orders for part ABC I?
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9. (A) What is the Ordering Costs (S) for the Master Co. for purchase orders?

(B) What is the Ordering Cost (S) for manufacturing Part A223?

Given: Yellow Co. makes 3 parts (X, Y, Z) and the total labor required to produce each unit of X is 5 hr, Y is 3 hr, and Z
is 4 hours. The company has decided to let the Master Production Scheduler balance the work force by changing the MPS
for Part Y. Using just weeks one and two, the total Part Y's required is 200. Therefore to balance the work force, how
many units ofY should be scheduled in week 1 (the remainder of the 200 would then be scheduled in week 2). The
Master Production Schedule for their three products for first 12 weeks of the year is:
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2220571oo120
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140 140 1200
100
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200
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400
100
120
200
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,10. 1510 (A)What is the Production Plan in total units for the month of January?

1 __ 1_7_, _0__ (B) How many Y's to be scheduled in WK 1 to balance total labor needs for WKs 1& 2.

1& 70 l(; 70

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 Given: Company XYZ has a carrying cost rate of .25 and a Unit cost of $60 for Part A. The ordering cost of$300. Using
Fixed Period Order (FPO) the period = 3. No inventory on hand. FOQ is the Fixed Order Quantity lot-sizing technique.
Note: Holding cost i~ the same as carrying cost. ~!-:::60 f. 2S) -:...Ij .li. :: L 2J
!eriods Jan Feb Mar Apr Jun }2 pior
May
Requirements 40 50 50 50 60 40

11. "30 2 ,5 (A) What is inventory carrying cost for Part A (6 periods) using a FPO (P=3) lot-sizing technique

_b_O_O__ (B) What is the order cost for Part A (for 6 periods) using a FPO (P=3) lot-sizing technique
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12. _1._S_Q __ (A) What is inventory carrying cost for Part A (for 6 periods) using a FOQ (l00 units) lot-size

(B) What is the ordering cost for Part A (for 6 periods) using a FOQ (l00 units) lot-size

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(A) What is the inventory carrying cost for Part A (for 6 periods) using a LFL lot-size
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the ordering costF for Part A M
(for 6 periods) ,.(! )V\ lot-size J
using a LFL.
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Given: The Frantic Widget Co. makes Widgets. They are experiencing inventory problems for a component part
XYZ. Given: The following data:
• Monthly demand ,= 1000 units
• Lead time = 3 months
Mean Absolute Deviation of Demand vs. Forecast = MAD = 50
• Forecast period = 8 weeks -: ll'f\Q II1 h r
• Probability factors: 50 * I.' .....
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Values Values Level
1.60 1.28 90%
eL:t§:/ 1.41 92%
2.06 1.65 95%
2.56 2.05 98%
2.91 2.33 99%

15. i() <6 (A) What is the safety stock amount for a service level of92%?

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Given: On the attached Master Production Schedule (MPS), Product structure and MRP Worksheet for Part A.
16. Do the NET MRP for Part A on the Worksheet attached:
'7. Do the NET MRP for Part B on the Worksheet attached:
18. Do the NET MRP for Part C on the Worksheet attached:

19. L-l <g 00 Using the Product Structure for Part A above, if there are no parts in stock, and we need 300 Part A's
then what is the gross requirements for Part E?

Given: The Rain Barrel Manufacturing Company produces short runs that they ship to hardware stores. The company
wants to reduce inventory by changing to a "Kanban" system. They developed the following data.

WeekI Demand 4000 units S -::.-800

Production Lead Time 4 days 31..00
Safe Stock 1/2 da o 0
Container Size 200 units

20. __ J_~ What is number of Kanbans (containers) needed?

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 21. A system that provides feedback to the capacity plan, MPS, and production plan is
\© Closed-loop MRP d. MRP II
b. Enterprise Resource Planning e. Materials Requirements Planning
c. Distribution Requirements Planning

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{ ®In capacity planning, sending the lot to two different machines for the same operation is called:
overlapping c. capacity splitting e. none of the above
b. lot splitting d. operations splitting

23. Which of the following is NOT a condition that favors the success of Vertical integration?
a. availability of capital
b. availability of management talent
small market share
e. all of the above
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c. required demand

24. What is the objective (2 parts) of the Purchasing Activity as per the Purchasing handout?

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25. List the steps you would follow to do an ABC analysis of your company's inventory parts using annual dollar volume
method

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 27. Name at least four of the five supply-chain strategies.
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28. The Lean Manufacturing checklist is called the 5Ss are -list all five components that start with an (s).
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29. List and explain at leastJour of the EIGHT WASTES listed in the Lean Manufacturing handout

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30. Chapter 16 lists 6 concerns of suppliers on entering into a TIT partnership. List four of these concerns.

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Bonus: Explain the difference between these two purchasing negotiation strategies: "cost-based price model" and
"market-based price model" !
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Bonus: How does a person in the inventory management field obtain professional certification, what is the certification
called, and what professional organization gives the certification. (Hint there are two of them, please name one of them)

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 Do an MRP Work Sheet for Part A, Part B, and Part C. The Master Production Schedule (MPS) and Product
structure for Part A is shown on the MRP Worksheet. Part A product structure is given below. Note: Take into
account the beginning on-hand inventory amount and any scheduled receipts given. Take into account the lot-
sizes given, lead-times given and any need for to carry safety stock. Note: just put in the gross requirements,
projected available inventory, planned receipts, and any planned order releases for each part.

IMRP Work Sheet IExam 3A I

Master Production Schedule

) PART ,/ A
,,'X 0MAR
JUNE
APR
MAY
JULY
,noFEB
D
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AUG
')So
2
'\IO(}l.On
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()0n
"0f');)0(') 50
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(7c-)O) 0
JAN
250 (l.O (I) 2-Db
Proj. Avail. Bal.

Q = 150 LT = 2 SS = 0

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JUNED
MAR
APR
MAY
7..0
\)
1.100 D
7-0
JULY
AUG
FEB
()
1-1\)(1 400
()) . () r44ofl-;-~
'L(]
1.-.10
f...IO() LiOf':, \)
JAN '10 ''2.0 V (-.
Proj. Avail. Bal.

Q = LFL LT = 2 SS = 20

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PART C JAN
Gross Requirements o
Scheduled Reciepts
(Planned Reciepts)
'-1
Proj. Avail. Bal. 400 YO 0
Planned Order Release

Q=POQ LT=1 SS=50

P=4