A large producer of household products purchases a glyceride used in one of itsdeodorant soaps from outside of the company. It uses the glyceride at a fairly steady rateof 40 pounds per month, and the company uses a 23 percent annual interest rate tocompute holding costs. The chemical can be purchased from two suppliers, A and B. Aoffers the following all-units discount schedule:Order SizePrice per Pound0

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Answered: A large producer of household products…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter10: Introduction To Simulation Modeling

Section10.4: Simulation With Built-in Excel Tools

Problem 15P

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Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from two suppliers, A and B. A offers the following all-units discount schedule: (given) whereas B offers the following incremental discount schedule: $1.25 per pound for all orders less than or equal to 700 pounds, and $1.05 per pound for all incremental amounts over 700 pounds. Assume that the cost of order processing for each case is $150. Which supplier should be used?
A Mercedes dealer must pay $20,000 for each carpurchased. The annual holding cost is estimated to be 25%of the dollar value of inventory. The dealer sells an averageof 500 cars per year. He believes that demand is backloggedbut estimates that if he is short one car for one year he willlose $20,000 worth of future profits. Each time the dealerplaces an order for cars, ordering cost amounts to $10,000.Determine the Mercedes dealer’s optimal ordering policy.What is the maximum shortage that will occur?
A local company produces an erasable programmable read-only memory (EPROM) for severalindustrial clients. It has experienced a relatively flat demand of 2,500 units per year for theproduct. The EPROM is produced at a rate of 10,000 units per year. The accounting departmenthas estimated that it costs $50 to initiate a production run, each unit costs the company $2 tomanufacture, and the cost of holding is based on a 30 percent annual interest rate. Determinethe optimal size of a production run, the length of each production run, and the average annualcost of holding and setup. What is the maximum level of the on-hand inventory of the EPROMs?
The bookstore at Tech purchases jackets emblazoned withthe school name and logo from a vendor. The vendor sellsthe jackets to the store for $38 apiece. The cost to the bookstore for placing an order is $120, and the annual car-rying cost is 25% of the cost of a jacket. The bookstore manager estimates that 1700 jackets will be sold during theyear. The vendor has offered the bookstore the followingvolume discount schedule: Order Size Discount1–299 0%300–499 2%500–799 4%800 5% What is the bookstore’s optimal order quantity, given thisquantity discount information?
ABC firm uses roughly 3,400 pounds of chemical dye a year. Currently, the firm purchases 300 pounds per order and pays P120.00 per pound. The supplier has just announced that orders of 1,000 pounds or more will be filled at a price of P80.00 per pound. The manufacturing firm incurs a cost of P4,000.00 each time it submits an order and assigns an annual holding cost of 17% of the purchase price per pound. a. Determine the order size that will minimize the total cost.b. If the supplier offered the discount at 1,500 pounds instead of 1,000 pounds, what order size would minimize total cost?
Skinner's fish market buys fresh boston bluefish daiily for $4.20 per pound and sells it for $5.50 per pound. at the end of each business day any remaining bluefish is sold to a producer of cat food for $1.60 per pound. Daily demand can be approximated by a uniform distribution between 200 and 320 pounds. What is the optimal order qunatity.
The Rahway, New Jersey, plant of Metalcase, a manufacturer of office furniture, produces metaldesks at a rate of 200 per month. Each desk requires 40 Phillips head metal screws purchasedfrom a supplier in North Carolina. The screws cost 3 cents each. Fixed delivery charges and costsof receiving and storing shipments of the screws amount to about $100 per shipment, independently of the size of the shipment. The firm uses a 25 percent interest rate to determineholding costs. Metalcase would like to establish a standing order with the supplier and is considering several alternatives. What standing order size should they use?
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ANT Infra orders two kinds of precast items: A and B for use in its projects from two different suppliers. The precasts are needed throughout the entire 52-week year. Precast A are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. While, precast B is ordered from a supplier who delivers by every three weeks. Data for both precast items are as follows:Item Precast A Precast BAnnual demand 10,000 5,000Holding cost (% of item cost)20% 20%Order cost $150 $25Lead time 4 weeks 1 weekSafety stock 55 units 5 unitsItem cost $10.00 $2.00 a. Employ Q system for precast A and calculate the EOQ, the reorder point, total inventory cost? b. Employ P system for precast B and estimate the target level inventory and total inventory cost?
The catering manager of La Vista Hotel, LisaFerguson, is disturbed by the amount of silverware she is losing every week. Last Friday night, when her crew tried to set up for a banquet for 500 people, they did not have enoughknives. She decides she needs to order some more silverware,but wants to take advantage of any quantity discounts hervendor will offer.For a small order (2,000 or fewer pieces), her vendorquotes a price of $1.80Ypiece.If she orders 2,001–5,000 pieces, the price drops to$1.60Ypiece. 5,001–10,000 pieces brings the price to$1.40Ypiece, and 10,001 and above reduces the price to $1.25.Lisa’s order costs are $200 per order, her annual holdingcosts are 5%, and the annual demand is 45,000 pieces. For thebest option:a) What is the optimal order quantity?b) What is the annual holding cost?c) What is the annual ordering (setup) cost?d) What are the annual costs of the silverware itself with anoptimal order quantity?e) What is the total annual cost, including ordering,…
An online footwear firm Shoe-n-co has four regional warehouses. Demand at each warehouse is normally distributed with a mean of 10,000 per week and a standard deviation of 2,000. Annual holding cost is 25%, and each unit of Prancs rubber shoes costs the company $10. Each order incurs an ordering cost of $1,000 (primarily from fixed transportation cost), and lead time is 1 week. The company wants the probability of stocking out to be no more than 5%. Assume 50 working weeks per year. What is the average inventory held at each warehouse? What is the annual inventory cost (holding + ordering) for Shoe-n-co? On average, how long does a unit of product spend in the warehouse before being sold? .. Little's law, maybe?

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