Question

What is the relationship between inventory cost and transportation cost? Explain.

Question 13

What is one specific way you would recommend a bowling alley take advantage of revenue management?

Question 14

Complete the MRP planning schedule below and answer the THREE questions below. Lead time is 1 week, safety stock is 0, order policy is EOQ of 75.

In each blank put only the number as your answer. (There is no partial credit for each individual part, so no need to show your work.)

Period:	1	2	3	4	5
Gross requirements			20		80
Scheduled receipts
Projected available balance	10
Net requirements
Planned order receipts
Planned order releases

1. What are the NET REQUIREMENTS in time period *3*? (Put the answer in the first blank below.)

2. What are the PLANNED ORDER RELEASES in time period *1*? (Put the answer in the second blank below.)

3. What are the PROJECTED AVAILABLE BALANCE in time period *3*? (Put the answer in the third blank below.)

Question 15

A particular raw material is available at the following prices:

1) $3.10 for orders of less than 1000

2) $3.08 for orders between 1000 and 1999

3) $3.07 for orders 2000 and larger

Annual demand is 12000 items, order cost is $25, and holding cost is 20% of the item's cost per year. What is the economic order quantity? Show work.

Answer 1

13)

Inventory cost and transportation cost are directly linked to each other and companies always have to trade off between the two costs. The transportation cost is related to transfer of goods or materials from one place to another. It includes the procurement of goods from vendor for production. The inventory cost is the cost of holding the inventory in house which results in capital blockage. Both the costs are burden for the company and aim is to optimize. The transportation cost is minimum when the vehicle utilization is to the maximum level. Additionally, the cost per unit for transportation is lower in case of big vehicles like 32 feet container or 40 feet container in comparison to small vehicles. But, it may happen that as per Economic order quantity, the quantity desired is much lesser than full truck load. In such scenario, the cost of transportation will go up due to less than truck load usage. But it will help to control the inventory along with space blockage.

EOQ = sqrt(2*Demand*Ordering cost/Holding cost)

Ordering cost is related to transportation cost whereas Holding cost is related to inventory cost