Spreadsheet Models for Managers

Getting Access to Spreadsheet Models for Managers

f you use Excel to model businesses, business processes, or business transactions, this course will change your life. You'll learn how to create tools for yourself that will amaze even you. Unrestricted use of this material is available in two ways.

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Spreadsheet Models for Managers

Problem Set 11
Inventory Modeling

Be sure to check the list of worksheet functions that are needed for the homework assignments, to see which new functions (if any) might help with this one.
For a quick way to copy homework problem data into your homework solution, see "Avoid retyping homework problem data."
Since macros are not permitted in this homework assignment, be certain that your workbook has no macros.
Remember that some problems are slight extensions of what we show you in demonstrations and the session notes, and some problems are somewhat ambiguous. This is intended to parallel what you'll frequently encounter at work. If you feel a bit confused, there are some things you can do to help clarify things.
Before attempting this homework, you might find it helpful to read about:

Economic Order Quantity

Numbers at the left in square brackets indicate point values.

11.1 [20]

Kansas Fried Chicken logo The regional warehouse of a fast food chain, Kansas Fried Chicken, orders buckets for its fried chicken every four months. Demand for fried chicken is constant, requiring 150 cases per month. A case of buckets costs $21.30. Assume that inventory is 0 on December 31, and that the first order is received on January 1. Assume also that you receive each new order at exactly the moment that your inventory is depleted.

(a) [2]

Find the inventory of chicken buckets, measured in cases, at the beginning of each month of a twelve-month year.

(b) [3]

Find the maximum inventory (in cases).

Find the average inventory (in cases) over one order cycle.

(d) [5]

Find the average annual inventory (in cases).

(e) [5]

Find the average dollar investment required to maintain the inventory.

11.2 [40]

Kansas Fried Chicken estimates that it spends $91 when it places an order for chicken buckets, and that the cost of maintaining inventory is approximately 25% of its average inventory investment on an annual basis.

(a) [8]

Compute the economic order quantity in cases.

(b) [8]

How many orders are required annually (on average)?

If KFC orders buckets in this way, what are annual ordering costs?

(d) [8]

If KFC orders buckets in this way, what are annual holding costs?

(e) [8]

How much is saved annually compared to the old ordering cycle used in Problem 11.1?

11.3 [40]

KFC has negotiated a deal with its paper supplier which gives KFC a quantity discount on its per order purchases of chicken buckets. The price schedule below shows the price per case of buckets as a function of the number of cases ordered:

Quantity	Price
1-399	$21.00
400-1199	$18.00
1200 or more	$17.40

(a) [20]

Assuming that the cost to order is $91 and that the cost to hold is 25% per year, compute the optimum order quantity. Note that the optimum order quantity might be different from the Economic Order Quantity.

(b) [20]

How much would be lost or saved annually by each discount option compared to the EOQ strategy for each price range?

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Feeling queasy about spreadsheets?

We run our companies, in part, based on spreadsheets, yet we often wonder if they're really right. Learn more about improving the reliability and effectiveness of your financial models.

With dozens of solved problems and special course tools, this course can dramatically increase your spreadsheet skills. For just USD 199.00 you receive three months of access with unlimited email support. Learn more about improving your spreadsheet sophistication and effectiveness.

Get the Hyperbook Edition of This Course

Identical to the edition you're viewing, but with dozens of solved problems and special course tools, and it stands alone — no Internet connection required. For just USD 199.00, it includes three months of unlimited email support. Learn more about improving your spreadsheet sophistication and effectiveness.

Spreadsheet Models for Managers

Getting Access to Spreadsheet Models for Managers

Spreadsheet Models for Managers

Problem Set 11
Inventory Modeling

11.1 [20]

Instructor Contact Information

Author Contact Information

Spreadsheet Models for Managers

Getting Access to Spreadsheet Models for Managers

Spreadsheet Models for Managers

Problem Set 11Inventory Modeling

11.1 [20]

Instructor Contact Information

Author Contact Information

Problem Set 11
Inventory Modeling