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Homework answers / question archive / Indiana University, Bloomington - BUS P603 Chapter 12 Question1)L

Indiana University, Bloomington - BUS P603 Chapter 12 Question1)L


Indiana University, Bloomington - BUS P603

Chapter 12

Question1)L. Houts Plastics is a large manufacturer of injection molded plastics in North Carolina. An investigation of the company’s manufacturing facility in Charlotte yields the information presented in the table below. How would the plant classify these items according to an ABC classification system?

L. Houts Plastics’ Charlotte Inventory Levels











Question 2:



Joe Henry’s machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets:


  1. Given the above information, what would be the economic order quantity (EOQ)?
  2. Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?
  3. Given the EOQ, how many orders would be made each year? What would be the annual order cost?
  4. Given the EOQ, what is the total annual cost of managing the inventory?
  5. What is the time between orders?
  6. What is the reorder point (ROP)?













3. Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,000 flashing lights per year and has the capability of producing 100 per day. Setting up the light production costs $50. The cost of each light is $1. The holding cost is $0.10 per light per year.


Operation period

300 days


12,000 per years

Capacity of producing

100 per day

cost of setting up the production


Cost of each light

1 per unit

Holding cost

0.1 per unit per year







4. Authentic Thai rattan chairs (shown in the photo) are delivered to Gary Schwartz’s chain of retail stores, called The Kathmandu Shop, once a year. The reorder point, without safety stock, is 200 chairs. Carrying cost is $30 per unit per year, and the cost of a stockout is

$70 per chair per year. Given the following demand probabilities during the lead time, how much safety stock should be carried?




Demand during leadtime
































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