Q1.

Suppose that instead of ordering the optimal order quantity of 20,000 units in each order for a product, the operations manager orders 200,000 units/order. What is the effect on the total annual cost?

Q2.

A manufacturing concern has a fixed cyclic demand, with a period of one week, as follows:

Company policy is to maintain constant daily production. The production and shipping departments work seven days a week and each day’s production is available for shipment on the following day. If a shortage costs four times as much per day as a surplus of the same amount, how much stock should be on hand at the start of business on Monday?

Q3.

A company purchases valves that are used at a rate of 200 per year. The cost of each valve is Rs 50/- and the cost of placing each order is Rs 5/-. The inventory carrying cost rate/year is assumed to be 0.10. Shortage losses are a fixed cost of 20 paise per unit and a variable cost of Rs 10 per unit per year. The lead time is 6 months. Determine the optimal order quantity and the reorder point.

Q4.

A small electronics company purchases 3 types of subcomponents. The management desires never to have an investment in these items in excess of Rs. 15000. No back orders are allowed and the inventory carrying cost rate for each item is 20%. The pertinent data is shown in the following table. Determine the optimal lot size for each item.

Q5.

Suppose that an item may be purchased for Rs. 25 per unit or manufactured at the rate of 10,000 units per year for Rs 22 each. However, if purchased, the ordering cost is only Rs 5 and the setup cost = Rs 500 if it is manufactured. The yearly demand for this item is 2500 units and the inventory holding cost rate is 10%. Determine whether to manufacture or purchase the item and the relevant lot size and cycle time.

Q6.

Determine the economic lot size and the associated total cost and length of time between two orders if

Suppose the demand distribution per unit time is normal with mean =30 and constant variance . Determine the buffer stock such that the probability of stock out during lead time is at most 0.02

Q7.

A manufacturer uses large quantities of a purchased product in his manufacturing operations. He wants to have a constant lot size and no shortages. Annual demand for the part is 300,000 uniformly spread over the year. Fixed cost of placing an order is Rs 80. Annual cost of interest, insurance, taxes etc. is 20% of the item cost. Cost of storage/unit/month = Rs 10. Vendor’s price schedule – a fixed charge of Rs 20 per order plus a charge per unit as follows:

Determine the optimum order quantity, cycle time between two consecutive orders and plot the total cost curve.