Question

2. Describe the major cost categories used in inventory analysis and their functional relationship to each other?

3. Describe the difference between independent and dependent demand and give an example of each for a pizza restaurant such as Domino`s or Pizza Pizza?

4. What are the assumptions of the basic EOQ model, and to what extent do they limit the usefulness of the model?

5. Wallace Stationery Company purchases paper from the Seaboard Paper Company. Wallace produces stationery that requires 1,415,000 sq. metres of paper per year. The cost per order for the company is $2200; the cost of holding 1 sq. metre of paper in inventory is $0.08 per year. Determine the following:

a. Economic order quantity

b. Minimum total annual cost

c. Optimal number of orders per year

d. Optimal time between orders?

6. The Goodstone Tire Company produces a brand of tire called the Rainpath. The annual demand at its distribution center is 12,400 tires per year. The transport and handling costs are $2600 each time a shipment of tires is ordered at

the distribution center. The monthly carrying cost is $0.125 per tire.

a. Determine the optimal order quantity and the minimum total annual cost.

b. The company is thinking about relocating its distribution center, which would reduce transport and handling costs to $1900 per order but increase carrying costs to $4.50 per tire per year. Should the company relocate based on inventory costs?