Operation Magement

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1. Lead time for one of Montegut Manufacturing's fastest moving products is 4 days. Demand during this period averages 100 units per day. What would be an appropriate re-order point?
Re-order point = demand during lead time = 100 units/day * 4 days = 400 units.

2. Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 per day, while demand is 40 per day. Holding costs are $1.00 per unit per year; set-up costs $200.00. If they wish to produce this product in economic batches, what size batch should be used? What is the maximum inventory level? How many order cycles are there per year? How much does management of this good in inventory cost the firm each year?

This problem requires economic order quantity, noninstantaneous delivery. [pic]or 1826 units.
The maximum inventory level is [pic]or 1095 units.
There are approximately [pic] cycles per year.
Annual inventory management costs total [pic]= $2,190.89 or $2,191.

3. Central University uses $123,000 of a particular toner cartridge for laser printers in the student computer labs each year. The purchasing director of the university estimates the ordering cost at $45 and thinks that the university can hold this type of inventory at an annual storage cost of 22% of the purchase price. How many months' supply should the purchasing director order at one time to minimize the total annual cost of purchasing and carrying? First, calculate the EOQ from the data provided. In this problem, the "units" are dollars, and the "price" of each is 1. [pic]

One month's usage is 123000/12 = $10,250. EOQ = 7094. Month’s usage = 7094/10250 = 0.69, or about three week’s usage. (This is supported by the order frequency of 17 per year).

4. The soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the...
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