# Inventory Homework Problems

Pages: 3 (854 words) Published: January 4, 2013
Inventory homework problems

(Due July 16 (Monday) )

Problem 1(10 points). Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between two plants using trucks, with each trip costing \$1,000. The motorcycle plant assembles and sells 438 motorcycles each day. Each engine costs \$500, and Harley incurs a holding cost of 20 percent per year. How many engine should Harley load onto each truck? What is the cycle inventory of engines at Harley? (Assume that they work 250 days per year)

Problem 2 (10 points). As part of its initiative to implement JIT manufacturing at the motorcycle assembly plant in the previous problem, Harley has reduced the number of engines loaded on each truck to 100. If each truck still costs \$1,000, how does the decision impact annual inventory costs at Harley? What should the cost of each truck be if a load of 100 engines is to be optimal for Harley?

Problem 3 (10 points). Smith Company purchases components from three suppliers. Components purchased from Supplier A are priced at \$5 each and used at the rate of 20,000 units per year. Components purchased from Supplier B are priced at \$4 each and are used at the rate of 2,500 units per year. Components purchased from Supplier C are priced at \$5 each and used at the rate of 900 units per year. Smith incurs a holding cost of 20 percent per year. Currently, Smith purchases a separate truckload from each supplier. As part of JIT drive, Smith has decided to aggregate purchases from the three suppliers. The trucking company charges a fixed cost of \$400 for the truck with an additional charge of \$100 for each stop. Thus, if Smith asks for a pickup from only one supplier, it charges\$500; from two suppliers, it charges \$600, and from three suppliers, it charges \$700. Suggest a replenishment strategy for Smith that minimizes annual cost. Compare the cost of your...