Question M3 W ritten Assignment (Due December 7, 2014)

04 Jun Question M3 W ritten Assignment (Due December 7, 2014)

Question
M3 W ritten Assignment (Due December 7, 2014)

Submit your solutions to the following problems. Write your solutions clearly and neatly.

Show all your work to get credit!

1. (Chapter 9) A specialty coffeehouse sells Colombian coffee at a fairly steady rate of 65 pounds per week. The beans are purchased from a local supplier for $4 per pound. The coffeehouse estimates that it costs $50 in paperwork and labor to place an order for the coffee, and the annual holding cost is 20% of the purchasing price. (Use 52 weeks/year)

a. What is the economic order quantity (EOQ) for Colombian coffee?

b. What is the optimal number of orders per year?

c. What is the optimal interval (in weeks) between the orders?

d. (B O NUS 5 points) Assume that the current order policy is to buy the beans every 13 weeks. The manager says that the ordering cost of S = $50 is only a guess. Therefore, he insists on using the current policy. Find the range of S for which the EOQ you found in part a) would be preferable (in terms of a lower total replenishment and carrying costs) to the current policy of buying beans every 13 weeks.

2. (Chapter 9) A store has collected the following information on one of its products: Demand = 6,760 units/year

Standard deviation of weekly demand = 18 units Ordering costs = $40/order

Holding costs = $2/unit/year Cycle-service level = 90% Lead-time = 3 weeks

Number of weeks per year = 52 weeks

a. If the firm uses the continuous review system to control the inventory, what would be its order quantity and reorder point?

b. Assume that the firm decided to change to the periodic review system to control the

P, is calculated using the EOQ model. Forthe most recent review, an inventory clerk checked the inventory of this item and found 500 units. There were no scheduled receipts or backorders at the time. Determine how many units should the firm order.

3. (Chapter 10) The Marlin Company operates 50 weeks a year, and its cost of goods sold last year was $1,800,000. The firm carries six items in inventory: three raw materials, two work-in-

average inventory levels for these items, along with their unit values.

Category

Part Number

Average Inventory

Value per Unit

Units

RM-1

1750

$15

Raw Materials

RM-2

1500

$20

RM-3

1900

$10

Work-in-process

WIP-1

1500

$40

WIP-2

1300

$50

Finished Goods

FG-1

1000

$120

a. What is their average aggregate inventory value?

b. How many weeks of supply does the firm have?

c. What was their inventory turnover last year?

d. The turnover ratio is widely used because it is a common measure that links to the financial statements of the firm. Discuss the benefits and drawbacks of using this measure.

4. (Chapter 11)

new facility. The search has been narrowed to five locations, all of which are acceptable to management. The assessment of these sites is being made on the basis of the five subjective location factors that follow. Management has agreed to use a five-point scale (Excellent = 5, and Poor = 1) to quantify and compare their subjective opinions about the relative goodness of the sites. The weight reflects the importance of each factor in the decision. Calculate the weighted score for each alternative. Which location would you recommend? Why?