Question

Question 2 A car engine manufacturer has the following production goals for the next year:

Engine	Quantity	Machine Req’s
V6	2000	6hrs
V8	1500	10hrs
V12	100	20hrs

If all three engines can be produced by the same machines and each of the manufacturer’s machines operate for 2400 hours per year, how many machines are required for the above product mix?

Question 3

A manufacturing operation has three stages:

•Stage 1 Capacity: 400 units/hr

•Stage 2 Capacity: 300 units/hr

•Stage 3 Capacity: 500 units/hr

What is the operation’s hourly capacity?

Queestion 4

You are charged with managing crude oil inventories at a refinery

Given:

Holding cost = $10 per barrel per year

Order placement cost = $2000

Order quantity = 10,000 barrels

Annual demand = 1,000,000 barrels

Over the next year, what are:

Holding costs if average inventory is 8,000 barrels?

Ordering costs if average inventory is 6,000 barrels?

Question 5

A retailer sells iPhones. Annual demand is 4000 units, the order placement cost is $100, and the unit holding cost is $200/yr.

What is the economic order quantity?

What are annual holding and ordering costs?

Question 5

Suppose a grocery store buys milk (in gallon jugs) using the EOQ model with quantity discounts.

Holding cost is $0.10 per gallon per day

Order placement cost is $20, regardless of size

Weekly demand is 350 gallons

The milk supplier offers two discount levels for order quantity Q:

$0.05 per gallon when 100 gal. ? Q < 200 gal.

$0.045 per gallon when Q ? 200 gal.

What order quantities need to be checked?

What is the economic order quantity?

Answer 1

2

Total machine hours required = 2000*6 + 1500*10 + 100* 20 = 29000

Number of machines required = 29000/2400 = 12.08

as number of machines cannot be in decimal roundup the answer to 13.

3

Capacity will be determined by the stage with the lowest capacity i.e. Stage 2, hence capacity of the operation is 300 units/hr

4

Total holding cost = Average inventory * holding cost per barrel per year = $ 8,000 * 10 = $ 80,000

Ordering cost = Order placement cost * Demand/Quantity = $2000 * 1,000,000/10,000 = $ 2,00,000

5

EOQ = sqrt (2*Demand*Ordering Cost/Holding Cost) = sqrt(2*4000*100/200) = 63.24