# MGT 322 Chapter 13. Questions and Answers.

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MGT 322 Chapter 13 Chapter 13 1 – The manager of an automobile repair shop hopes to achieve a better allocation of inventory control efforts by adopting an A-B-C approach to inventory control. Given the monthly usages in the following table, classify the items in A, B, and C categories according to dollar usage: Determine the percentage of items in each category and the annual dollar value for each category. 3 – A large bakery buys flour in 25-pound bags. The bakery uses an average of 4,860 bags a year. Preparing an order and receiving a shipment of flour involves a cost of \$10 per order. Annual carrying costs are \$75 per bag. a. Determine the economic order quantity. b. What is the average number of bags on hand? ? c. How many orders per year will there be? d. Compute the total cost of ordering and carrying flour. ? e. If holding costs were to increase by \$9 per year, how much would that affect the minimum total annual cost? 5 – Garden Variety Flower Shop uses 750 clay pots a month. The pots are purchased at \$2 each. Annual carrying costs per pot are estimated to be 30 percent of cost, and ordering costs are \$20 per order. The manager has been using an order size of 1,500 flower pots. a. What additional annual cost is the shop incurring by staying with this order size? ? b. Other than cost savings, what benefit would using the optimal order quantity yield? 9 – The Friendly Sausage Factory (FSF)can produce hotdogs at a rate of 5,000 per day. FSF supplies hot dogs to local restaurants at a steady rate of 250 per day. The cost to prepare the equipment for producing hot dogs is \$66. Annual holding costs are 45 cents per hot dog. The factory operates 300 days a year. Find: a. The optimal run size. ? b. The number of runs per year. ? c. The length (in days) of a run. ? Show Less

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