1. Scary Clowns, Inc., supplies special makeup cases to a majorcircus. The circus orders its EOQ of 1200 cases every two monthsfrom Scary Clowns. Scary Clowns incurs setup costs of $1800 everytime it produces these cases, and its annual holding cost per caseis $3.
a. How many units should ScaryClowns produce in each batch?
b. What is the total annual setupand holding cost for Scary Clowns using this policy?
2. Suzy’s Candy Distributors has anannual demand for its boxes of “Chocolate Heaven Candies” of250,000 units, an ordering cost of $85 per order, and an annualholding cost percentage of 16%. The current purchase price for eachbox is $28, but the supplier has notified Suzy that starting nextweek, the purchase price will rise to $40. Suzy’s inventory ofboxes is about to be depleted. How many boxes should Suzypurchase?
3. Consider a periodic reviewsystem, where orders are placed every 14 days. The firm strives toprovide a 96.5% cycle service level. Demand averages 400 units perday, and the standard deviation of demand per day is 84 units. Leadtime is 10 days.
a. How many units of safety stockshould be held?
b. What should the targetinventory level (order-up-to level) be?
c. Suppose that it istime to review the item. There are 170 units in inventory, andthere is an outstanding backorder for 300 units. An order for 88units is on the way. How many units should be ordered now?
4. Consider a continuousreview inventory system. Demand is normally distributed with anaverage of 64,000 per month and a monthly standard deviation of8020 units. Lead time is two weeks (assume four weeks per month).If the firm desires only a 67% cycle service level, how many unitsof safety stock should be held?
SHOW YOUR WORKPLEASE
