Operations Test 3 Practice Problems
What are some factors to consider when choosing a Forecasting technique?
Cost, accuracy, historical data availability, forecasting software availability, and forecast horizon
A service garage uses 96 boxes of cleaning cloths a year. The boxes cost $8 each. Ordering cost is $10 and holding cost is 10 percent of purchase cost per unit on an annual basis. Determine: (A) The economic order quantity (B) The total cost of carrying the cloths (C) The average inventory
D = 96, S = 10, H= 0.1*8 EOQ: SQRT(2*96*10/8*0.1) = 49 Boxes TC: (49/2*0.8) + 96/49*10) = $39.19 Avg Inventory: 49/2 = 25 Boxes
A bakery buys flour in 25-pound bags. The bakery uses 1,215 bags a year. Ordering cost is $10/order and annual carrying cost is $75 per bag. Determine: a. Economic Order Quantity b. Average number of bags on hand c. Amount of orders per year d. Total cost of ordering and carrying flour
D= 1215, S=10, H=75 a. EOQ = SQRT(1215*2*10/75) = 18 bags b. Avg on hand = 18/2 = 9 bags c. Orders/year = 1215/18 = 67.5 d. TC = (18/2*75) + (1215/18*10) = $1350
The operator of a concession at a downtown location estimates that he will sell 400 bags of circus peanuts during a year. Carrying costs are 17 percent of unit price and ordering cost is $22. The price schedule for bags of peanuts is: 1 to 199, $1.00 each; 200 to 499, $.94 each; and 500 or more $.87 each. What order size would be most economical?
D= 400, S= 22, H= 0.17*P EOQ: 1-199: SQRT(2*400*22/0.17) = 321 200-499: SQRT(2*400*22/0.16) = 332 500+: SQRT(2*400*22/0.15) = 345 TC332 = (332/2*0.16) + (400/332*22) + (400*0.94) = $429.07 TC500 = (500/2*0.15) + (400/500*22) + (400*0.87) = $403.10
A produce distributor uses 800 crates a month at a cost of $10 each. Annual carrying cost is 35% of the purchase price per crate. Ordering cost is $28. How much could the firm save annually in ordering and carrying costs by using EOQ?
D= 800*12 = 9600, S = 28, H= 10*0.35=3.5 EOQ= SQRT(2*9600*28/3.5) = 392 crates TC392 = (392*3.5/2) + (9600*28/392) = $1371 TC800 = (800*3.5/2) + (9600*28/800) = $1736 Savings will be $364
A company is about to begin production for a new product. The machine they use will produce the item at a rate of 200 units/day. 80 units will be used daily in assembling the final product. Assembly takes place 5 days a week, 50 weeks a year. The manager estimates production costs to be $300 and holding costs will be $10/year. Determine: a. Run quantity that minimizes annual total costs b. Amount of days to produce optimal run quantity c. Average amount of inventory d. If the manager needs a minimum of 10 days to run another job, will there be enough time?
D=200*5*50= 20000, S=300, H=10, p=200, u=80 a. SQRT(2*20000*300/10) = 1414 units b. 1414/200 = 7.07 days c. 1414/200*(200-80) = 848/2 = 424 units d. 848/80-1 = 9 days, so no there is not enough time to meet the minimum requirement
A firm can produce hot dogs at a rate of 5,000/day. They supply those hot dogs to local restaurants at a rate of 250/day. Cost to prepare the equipment is $66. Annual holding costs are 0.45/hot dog. They operate 300 days out of the year. Determine: a. Optimal run size b. Number of runs per year c. Amount of days it takes to produce Qo
D=250*300=75000, S= 66, H=0.45 p=5000, u=250 a. EPQ = 4812 hot dogs SQRT(2*75000*66/0.45)*SQRT(5000/5000-250) b. 75000/4812 = 16 c. 4812/5000 = 0.96 days
What are the steps to a forecasting process?
Determine Forecast purpose Establish time horizon Obtain and analyze appropriate data Select Forecasting techniques Make Forecast Monitor Forecasting errors
Demand = 10,000 yds/year Daily demand = 10,000 / 365 = 27.4 yds/day Lead time = L = 10 days What is the reorder point?
ROP = (27.4*10) = 274 yds
What are the elements of a good forecast?
Timely, accurate, reliable, meaningful units, in writing, simple to understand and use, and is cost-effective