# Question by xuyuzhu

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```									(1) Yasuko’s Art Emporium (YAE) ships art from its studio located in the Far East to its distribution
center located on the West Coast of the United States. YAE can send the art either via transoceanic
ship freight service (15 days transit) or by air freight (2 days transit time). YAE ships 18,000 pieces of
art annually.

Calculate the average annual transportation inventory when sending the art via transoceanic ship freight
service.

AIT = _____ units (Round your answer to 1 decimal place, the tolerance is +/-0.1.)

(2) Frederick’s Farm Factory (FFF) currently marintains an average inventory valued at \$3,400,000. The
company estimates its capital cost at 10 percent, its storage cost at 4.5 percent, and its risk cost at 10
percent.

(a) Calculate the annual holding cost rate for FFF

Annual holding cost rate =             % (Round your answer to 1 decimal place.)

(b) Calculate the total annual holding costs for FFF

Total annual holding costs = \$             .

(3) A local nursery, Greens, uses 1560 bags of plant food annually. It costs \$10 to place an order for plant
food. In an effort to reduce its inventory Rapid Grower, the supplier of plant food for Green, is offering
Greens two additional price breaks to consider. If the nursery orders a three-month supply, the cost per
bag s \$16. If Greens orders a six-month supply, the cost per bag is \$14.50. Greens estimates its holding
cost to be 25 percent of the unit price. Determine the most cost-effective ordering policy for Greens

_____ It is cheapest to order a 3-month supply
_____ It is cheapest to order a 6-month supply

(4) Sam’s Auto Shop services and repairs a particular brand of foreign automobile. Sam uses oil filters
throughout the year. The shop operates fifty-two weeks per year and weekly demand is 150 filters. Sam
estimates that it costs \$20 to place an order and his annual holding cost rate is \$3 per oil filter.
Currently, Sam orders in quantities of 650 filters. Calculate the total annual costs associated with Sam’s
current ordering policy.

Total annual costs = \$

(5) The local Office of Tourism sells souvenir calendars. Sue, the head of the office, needs to order these
calendars in advance of the main tourist season. Based on past seasons, Sue has determined the
probability of selling different quantities of the calendars for a particular tourist season.

Demand for Calendars        Probability of Demand
75,000                         0.15
80,000                         0.25
85,000                         0.30
90,000                         0.20
95,000                        0.10

The Office of Tourism sells the calendars for \$12.95 each. The calendars cost Sue \$5 each. The
salvage value is estimated to be \$0.50 per unsold calendar.

Determine how many calendars Sue should order to maximize expected profits

(6) Given the following list of items, (a) Calculate the annual usage cost of each item.

(b) Classify the items as A, B, or C.

Item Annual Usage (\$) Item Classification

101

102

103

104

105

201

202

203

204

205

(7) Tax Preparers Inc. works 250 days per year. The company uses adding machine tape at a rate of eight
rolls per day. Usage is believed to be normally distributed with a standard deviation of three rolls during
lead time. The cost of ordering the tape is \$10 and holding costs are \$0.30 per roll per year. Lead time
is two days.

(a) Calculate the economic order quantity

(b) What reorder point will provide an order cycle service level of 97 percent?

(c) How much safety stock must the company hold to have a 97 percent order-cycle service level?

units (Round your answer to 2 decimal places, the tolerance is +/-0.01.)
(d) What reorder point is needed to provide an order-cycle service level of 99 percent?

(e) How much safety stock must the company hold to have a 99 percent order-cycle service level?

units (Round your answer to 2 decimal places, the tolerance is +/-0.01.)

(8) The BackPack Company produces a line of backpacks. The manager, Jill Nicholas, has decided that the
BackPack Company must have very good customer service.
She has asked you to develop a level aggregate plan using inventories but not back orders. All demand
must be met each period. Use the following data to solve the problem:

Problem Data
Cost data
Regular-time labor cost per hour                                   \$10.00
Overtime labor cost per hour                                       \$15.00
Subcontracting cost per unit (labor only)                          \$84.00
Holding cost per unit per period                                   \$10.00
Back-order cost per unit per period                                \$20.00
Hiring cost per employee                                          \$600.00
Firing cost per employee                                          \$450.00

Capacity data
Beginning workforce                                         210 employees
Beginning inventory                                              400 units
Labor standard per unit                                            6 hours
Regular time available per period                               160 hours
Overtime available per period                                    32 hours
Subcontracting maximum per period                               1000 units
Subcontracting minimum per period                                500 units

Demand data
Period 1     6000 units
Period 2     4800 units
Period 3     7840 units
Period 4     5200 units
Period 5     6560 units
Period 6     3600 units

You must:

A. Calculate the aggregate production rate:           units

B. Calculate the appropriate workforce given the aggregate production rate:           employees

C. Show what would happen if this plan were implemented.

Period
Plan                    1           2        3          4            5        6         Total
Demand net of beginning
4800       7840        5200         6560     3600
inventory

Period production (units)
(If the answer is void please enter 0, do not leave any fields blank.)

D. Calculate the costs of this plan.

Regular-time labor cost
\$

Inventory holding cost
\$

Back order cost
\$

Hiring cost
\$

Firing cost
\$

Total cost
\$

(If the answer is void please enter 0, do not leave any fields blank.)

(9) Although the BackPack Company has always used a level aggregate plan, Jill is interested in evaluating
chase aggregate plans also. She has calculated how many hires and fires would be necessary to adjust
capacity to meet demand exactly each period.

Use the following data to solve the problem.

Problem Data
Cost data
Regular-time labor cost per hour                                   \$10.00
Overtime labor cost per hour                                       \$15.00
Subcontracting cost per unit (labor only)                          \$84.00
Holding cost per unit per period                                   \$10.00
Back-order cost per unit per period                                \$20.00
Hiring cost per employee                                          \$600.00
Firing cost per employee                                          \$450.00

Capacity data
Beginning workforce                                        210 employees
Beginning inventory                                              400 units
Labor standard per unit                                            6 hours
Regular time available per period                               160 hours
Overtime available per period                                    32 hours
Subcontracting maximum per period                               1000 units
Subcontracting minimum per period                                500 units

Demand data
Period 1       6000 units
Period 2       4800 units
Period 3       7840 units
Period 4     5200 units
Period 5     6560 units
Period 6     3600 units

Period                       1           2       3    4           5        6       Total
Employees Needed             210         180    294   195        246      135      1260

Now Jill wants to see how the plan would actually work. You need to:

A. Show what would happen if this plan were implemented.

Period
Plan          1               2              3        4                  5               6     Total
Demand                        4800             7840       5200            6560             3600
Employee
s
Hires

Fires

B. Calculate the costs associated with this plan.

Hiring Cost
\$

Firing Cost
\$

Regular-time labor Cost
\$

Total Cost                           \$

(10)      Problem Data

Cost data
Regular-time labor cost per hour                                       \$10.00
Overtime labor cost per hour                                           \$15.00
Subcontracting cost per unit (labor only)                              \$84.00
Holding cost per unit per period                                       \$10.00
Back-order cost per unit per period                                    \$20.00
Hiring cost per employee                                              \$600.00
Firing cost per employee                                              \$450.00

Capacity data
Beginning workforce                                            210 employees
Beginning inventory                                                  400 units
Labor standard per unit                                                6 hours
Regular time available per period                                    160 hours
Overtime available per period                                         32 hours
Subcontracting maximum per period                               1000 units
Subcontracting minimum per period                                500 units

Demand data
Period 1     6000 units
Period 2     4800 units
Period 3     7840 units
Period 4     5200 units
Period 5     6560 units
Period 6     3600 units

Jill Nicholas believes there must be a better aggregate plan. She has suggested a hybrid plan, using a
permanent workforce of 195 employees and subcontracting the backorder as needed. Once again, Jill has
requested that you provide the following information:

A. Calculate the regular-time production possible each period given a workforce of 195

B. Show what would happen if this plan were implemented.

Period
Plan              1            2              3        4             5               6      Total
Demand                           4800            7840     5200          6560         3600
Regular-time
production
units
Subcontractin
g
Ending
Inventory
Backorder
Units

(If the answer is void please enter 0, do not leave any fields blank.)

C. Calculate the costs associated with this plan.

Regular-time production cost
\$

Subcontracting cost
\$

Ending Inventory Cost
\$

Backordering Cost
\$

Firing Cost
\$

Total Cost
\$

(11)    The Draper Tax Company provides tax services to local businesses. Draper chooses to meet all
demand as it occurs because customers are unwilling to accept back orders. The company has provided
the following cost, capacity, and demand information.
Draper Tax Company Problem Data
Cost data
Regular-time labor cost per hour                                     \$25.00
Overtime labor cost per hour                                         \$37.50
Temporary worker cost per hour                                       \$40.00
Hiring cost per permanent worker                                   \$2000.00
Firing cost per permanent worker                                   \$1200.00
Backorder cost                                                      \$500.00

Capacity data
Beginning workforce                                          12 employees
Labor standard per service                                         12 hours
Regular-time hours per period                                      40 hours
Overtime hours per period                                           8 hours

Demand data
Week 1            48 clients          Week 4         40 clients
Week 2            36 clients          Week 5         38 clients
Week 3            50 clients          Week 6         48 clients

Calculate the size of the workforce needed for the company to meet average weekly demand.

Assume that no overtime is used.

(12)    The Draper Tax Company provides tax services to local businesses. Draper chooses to meet all
demand as it occurs because customers are unwilling to accept back orders. The company has provided
the following cost, capacity, and demand information.

Draper Tax Company Problem Data
Cost data
Regular-time labor cost per hour                                     \$25.00
Overtime labor cost per hour                                         \$37.50
Temporary worker cost per hour                                       \$40.00
Hiring cost per permanent worker                                   \$2000.00
Firing cost per permanent worker                                   \$1200.00
Backorder cost                                                      \$500.00

Capacity data
Beginning workforce                                          12 employees
Labor standard per service                                         12 hours
Regular-time hours per period                                      40 hours
Overtime hours per period                                           8 hours

Demand data
Week 1            48 clients          Week 4         40 clients
Week 2            36 clients          Week 5         38 clients
Week 3            50 clients          Week 6         48 clients

Develop a level aggregate plan for the Draper Company if no back orders are permitted.
A. Show what would happen if this plan were implemented.

Week
Plan          1             2              3        4               5           6          Total
Number
48             36            50        40             38          48           260
of Clients
Service
hours
Needed
Regular-
time
Hours
Undertim
e Hours

(If the answer is void please enter 0, do not leave any fields blank.)

B. Calculate the costs associated with this plan.

Regular-time labor Cost
\$

Hiring Cost
\$

Total Cost                                                    \$

(13)    The Draper Tax Company provides tax services to local businesses. Draper chooses to meet all
demand as it occurs because customers are unwilling to accept back orders. The company has provided
the following cost, capacity, and demand information.

Draper Tax Company Problem Data
Cost data
Regular-time labor cost per hour                                    \$25.00
Overtime labor cost per hour                                        \$37.50
Temporary worker cost per hour                                      \$40.00
Hiring cost per permanent worker                                  \$2000.00
Firing cost per permanent worker                                  \$1200.00
Backorder cost                                                     \$500.00

Capacity data
Beginning workforce                                        12 employees
Labor standard per service                                        12 hours
Regular-time hours per period                                     40 hours
Overtime hours per period                                          8 hours

Demand data
Week 1             48 clients           Week 4      40 clients
Week 2             36 clients           Week 5      38 clients
Week 3             50 clients           Week 6      48 clients

Develop a chase aggregate plan for Draper using a permanent workforce of twelve employees supplemented
by overtime. All demand must be met each period.
A. Show what would happen if this plan were implemented.

Week
Plan            1            2             3         4              5            6           Total
Number of
48             36            50          40           38            48           260
Clients
Service
hours
Needed
Number of
Employee
s
Regular-
time
Hours
Over time
hours
Under-
time
Hours

(If the answer is void please enter 0, do not leave any fields blank.)

B. Calculate the costs associated with this plan.

Regular-time labor Cost
\$

Overtime Cost
\$

Total Cost
\$

(14)     W. C. Sanders, owner of Fort Engines, a producer of heavy-duty snow blower engines, needs to
develop an aggregate plan for the coming year. The company currently uses twenty individuals working
160 regular-time hours each month. Each worker is capable of producing ten heavy-duty snow blowers
per month. Employees are paid \$12 per hour. Overtime is limited to a maximum of 40 hours per month
per employee. Overtime costs are \$18 per hour. Holding costs are \$5 per unit per period. Back-order
cost is \$10 per unit per period. The beginning inventory is 40 units. Monthly demand projections are:

Month       Demand (units)               Month     Demand (units)
January           250                    July            220
February          230                    August          220
March             190                    September       260
April             170                    October         260
May               200                    November        240
June              220                    December        220
A. Develop a hybrid aggregate plan using the initial workforce supplemented by overtime. If demand in any
period exceeds regular-time production plus overtime production plus any beginning inventory, the company
will use back orders. Calculate the cost of this plan.

Regular        Overtime
Month     Demand       production     production    Inventory   Backorder
Jan

Feb          230

Mar          190

Apr          170
May          200

June         220

July         220

Aug          220

Sept         260

Oct          260

Nov          240

Dec          220

Total

(If the answer is void please enter 0, do not leave any fields blank.)

Regular labor Cost
\$

Overtime Labor Cost
\$

Holding Cost
\$

Backorder Cost
\$

Total Cost
\$

B. Another alternative is to try a level plan that uses inventory and overtime to absorb fluctuation. Calculate
the cost of this plan if overtime units are averaged over the 12 months for the production process. Assume
no back orders are used.

Total

Demand

Regular production

Overtime production

Inventory

Backorder

Total

Regular labor Cost
\$

Overtime Labor Cost
\$

Holding Cost
\$

Total Cost
\$

C. A third alternative being considered is to use a level plan but also to close down the facility for the entire
month of July. Overtime, inventory, and back orders can be used. Calculate the cost of this plan. Assume
that the total required overtime units are averaged over the year (except July) for the production process.

Total

Demand

Regular production

Overtime production

Inventory

Backorder

Total

Regular labor Cost
\$

Overtime Labor Cost
\$

Holding Cost
\$

Backorder Cost
\$

Total Cost
\$

```
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