Compute the total cost of ordering and carrying flour

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Reference no: EM131304057

Operations Management Problems

Problem 1: Hershey Office Supply, Inc. produces office supplies that are sold primarily to corporate users. Elizabeth Rigby, vice president of logistics, would like to move ahead on a project that was started about a year ago. At that time, a group of logistics analysts developed a list of stock-keeping units (SKUs) and their annual sales (data is provided in an Excel file named "ISOM 319_Assignment 3_Q1.xlsx" posted in the same folder).

She would like to develop tighter inventory controls for SKUs. Your task is to prepare the following analysis for her.

a. Classify the SKUs in the list as A, B, or C items based on their annual sales revenues, where A items generate the first 80 percent of the revenues, B items generate the next 15 percent, and C items generate the remaining 5 percent.

b. Prepare a report that summarizes the SKU count, the percent of total SKUs, the sum of annual sales, and the percent of total sales by class (A, B, and C).

c. Develop an x-y scatter chart showing the cumulative percent of items (x) and the cumulative percent sales (y).

Problem 2: A large bakery opens 365 days per year and buys flour in 25-pound bags. The bakery uses an average of 48,600 bags a year. Preparing an order and receiving a shipment of flour involves a cost of $100 per order. Monthly carrying costs are $1 per bag.

a. Determine the economic order quantity.

Suppose that the economic order quantity that you calculate in Part 1 is used to order by the bakery, answer the following questions:

b. What is the average number of bags on hand?

c. How many orders per year will there be?

d. Compute the total cost of ordering and carrying flour.

e. The bakery's flour delivery lead time is 3 days. What is their re-order point?

Suppose due to warehouse capacity issues, the bakery can only hold a maximum of 500 bags of flour at any given time:

f. How much more do they have to pay for inventory costs compared to when they can order the EOQ?

Problem 3: Teddy Bower is an outdoor clothing and accessories chain that purchases a line of parkas at $10 each from its Asian supplier, TeddySports. Unfortunately, at the time of order placement, demand is still uncertain. Teddy Bower forecasts that its demand is normally distributed with mean of 2,100 and standard deviation of 1,200. Teddy Bower sells these parkas at $22 each. Unsold parkas have little salvage value; Teddy bower simply gives them away to a charity.

a. What is the probability that the demand of the parka is greater than 1,800 units?

b. What is the probability that the demand of the parka is between 1,800 and 2,500 units?

c. How many parkas should Teddy Bower buy from TeddySports to maximize expected profit?

d. If Teddy Bower wishes to ensure a 98.5 percent in-stock probability, how many parkas should it order?

For parts e and f, assume Teddy Bower orders 3,000 parkas.

e. Evaluate Teddy Bower's expected profit.

f. Evaluate Teddy Bower's stockout probability.

Problem 4: Flextrola, Inc., an electronics systems integrator, is planning to design a key component for their next-generation product with Solectrics. Flextrola will integrate the component with some software and then sell it to consumers. Given the short life cycles of such products and the long lead times quoted by Solectrics, Flextrola only has one opportunity to place an order with Solectrics prior to the beginning of its selling season. Flextrola's demand during the season is normally distributed with a mean of 1,000 and a standard deviation of 600.

Solectrics' production cost for the component is $52 per unit and it plans to sell the component for $72 per unit to Flextrola. Flextrola incurs essentially no cost associated with the software integration and handling of each unit. Flextrola sells these units to consumers for $121 each. Flextrola can sell unsold inventory at the end of the season in a secondary electronics market for $50 each. The existing contract specifies that once Flextrola places the order, no changes are allowed to it. Also, Solectrics does not accept any returns of unsold inventory, so Flextrola must dispose of excess inventory in the secondary market.

a. What is the probability that Flextrola's demand is between 800 and 1,200 units?

b. Under this contract, how many units should Flextrola order to maximize its expected profit?

c. What is Flextrola's expected profit when the order quantity calculated in Part (b) is ordered?

d. For Parts (d) through (h), assume Flextrola orders 1,200 units.

e. What are Flextrola's expected sales?

f. How many units of inventory can Flextrola expect to sell in the secondary electronics market?

g. What is Flextrola's expected profit?

h. What is Solectrics' expected profit?

i. What is Flextrola'sstockout probability?

Problem 5: The activities described by the following table are given for the Howard Corporation in Kansas.

Activity	Time	Immediate Predecessor(s)
A	9
B	7	A
C	3	A
D	6	B
E	9	B
F	4	C
G	6	E, F
H	5	D
I	3	G, H

a. Draw an AON network for the Howard Corporation.

b. Calculate the earliest start, earliest finish, latest start, and latest finish times, of the activities.

c. Calculate the slack of the activities and identify the critical path.

Except question 1 all needs to be solved.

Attachment:- Data.rar

Reference no: EM131304057

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