# 14 questions | BUSN603 Quantitative Analysis | American Public University

Lila Battle has determined that the annual demand for number 6 screws is 100,000 screws. Lila, who works in her brother’s hardware store, is in charge of purchasing. She estimates that it costs \$10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one screw in inventory for a year is one-half of 1 cent. Assume that the demand is constant throughout the year.

## Question 1 (10 points)

Question 1 options:To minimize total inventory cost, Lila should ordernumber 6 screws per order. (Please round to an integer and include no units.)

## Question 2 (5 points)

Question 2 options:Based on the calculation in Question 1, Lila needs to makeorders per year.

## Question 3 (5 points)

Question 3 options:Based on the calculation in Question 2, Lila’s total ordering cost isper year. (Please round to a whole dollar.)

## Question 4 (5 points)

Question 4 options:Based on the calculation in Question 1, Lila’s average inventory is. (Please round to an integer and include no units.)

## Question 5 (5 points)

Question 5 options:Based on the calculation in Question 4, Lila’s total holding cost isper year. (Please round to a whole dollar.)

## Part 2

Shoe Shine is a local retail shoe store located on the north side of Centerville. Annual demand for a popular sandal is 500 pairs, and John Dirk, the owner of Shoe Shine, has been in the habit of ordering 100 pairs at a time. John estimates that the ordering cost is \$10 per order. The cost of the sandal is \$5 per pair.

## Question 6 (10 points)

Question 6 options:If the carry cost were 10% of the cost, then the optimal order quantity would bepairs of sandal. (Please round to an integer and include no units.)

## Question 7 (10 points)

Question 7 options:If the optimal order quantity were 100 pairs of sandal, the carry cost should bepercent of the cost. (Please round to a whole percentage.)

## Part 3

Ross White’s machine shop uses 2,500 brackets during the course of a year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for \$15 each, and the lead time is 2 days. The holding cost per bracket per year is \$1.50 (or 10% of the unit cost) and the ordering cost per order is \$18.75. There are 250 working days per year.

Now, Ross White wants to reconsider his decision of buying the brackets and is considering making the brackets in-house. He has determined that setup costs would be \$25 in machinist time and lost production time, and 50 brackets could be produced in a day once the machine has been set up. Ross estimates that the cost (including labor time and materials) of producing one bracket would be \$14.80. The holding cost would be 10% of this cost.

## Question 8 (5 points)

Question 8 options:The daily demand rate for Rose White’s machine shop is. (Please round to an integer and include no units.)

## Question 9 (10 points)

Question 9 options:The optimal production quantity for Rose White’s machine shop is. (Please round to an integer and include no units.)

## Question 10 (5 points)

Question 10 options:Given the optimal production quantity calculated above, it will takedays for Rose White’s machine shop to produce the optimal production quantity. (Please round to one decimal point and include no units.)

## Question 11 (5 points)

Question 11 options:During the time producing the optimal quantity, (based on your calculation in Questions 8 and 10), there will be aboutbrackets sold. (Please round it to an integer and include no units.)

## Question 12 (10 points)

Question 12 options:If Rose uses the optimal production quantity calculated above in Question 9, the maximum inventory level would be, the average inventory level would be, and the annual holding cost would be. (Please round to an integer and include no units.)

## Question 13 (10 points)

Question 13 options:If Rose uses the optimal production quantity calculated above in Question 9, there would be aboutproduction runs each year. Hence, the total annual setup cost isand the total annual inventory cost, including the cost of production is. (Please round to an integer and include no units.)

## Question 14 (5 points)

Question 14 options:If the lead time is one-half day, the reorder point (ROP) isunits. (Please round to an integer and include no units.)

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