Applied operation research for management Assignments questions and problem Questions: 1. What is a replacement problem? 2.

What are the situations which make the replacement items necessary? 3. Discuss briefly the various types of replacement problems? 4. State some of the simple replacement policies? 5. Write short note on group replacement and individual replacement policy? 6. What is the advantage of preventive replacement over routine replacement? 7. Explain with examples the failure mechanism of items? 8. Discuss the importance of replacement models? 9. What are the motives for carrying inventory? 10. What are the advantages and disadvantages of having inventories? 11. Explain the terms: Lead time, Re-order point, Stock out cost and set up cost? 12. Define inventory? What are the different types of inventory in industries? Why is it important to control inventory? 13. What is an inventory problem? 14. Explain clearly the various costs that are involved in inventory problems? 15. What are inventory models? Enumerate various types of inventory models and describe them briefly? 16. What is economic order quantity? 17. What are the assumptions of the basic inventory model/ 18. Discuss the importance of inventory models? 19. Discuss the controlled and uncontrolled variables of inventory problem?

Problems: 1) A firm has machine whose purchase price in Rs 1, 00,000. Its running cost and resale price at the end of different years are as follows: Year: 1 2 3 4 5 6

Running cost (Rs): 7500 8500

10000 12500 17500 27500

Resale price (Rs): 85000 76500 70000 60000 40000 15000 a) Obtain the economic life of machine and the minimum average cost. b) The firm has obtained a contract to supply the goods produced by the machine, for a period of 5 years from now. After this time period, the firm does not intend to use the machine. If the firm has a machine of this type which is one year old, what replacement policy should it adopt if it intends to replace the m/c not more than once?

2)

The data on the operating cost per year and resale price of equipment A whose purchase price is Rs 10000 are given below. Year: 1 2 3 4 5 6 7 Operating cost: 1500 1990 2300 2900 3600 4500 5500 Resale price: 5000 2500 1250 600 400 400 400 a) What is the optimum period of replacement? b) When equipment A is two years old, equipment B, which is new model for the same usage, is available. The optimum period for replacement is four years with an average cost of Rs 3600. Should we change equipment A with equipment B? if so when?

3) The following mortality rates have been observed for a certain type of fuse: Week: 1 2 3 4 5 Percent failing by: 5 15 35 57 100 The end of week There are 1000 fuses in use and if costs Rs 5 to replace all individual fuse. If all fuses were replaced simultaneously it would cost Rs 1.25 per fuse. It is proposed to replace all fuses at fixed intervals of time, whether or not they have burnt out , and to continue replacing burnt out fuses as they fail. At what intervals the group replacement should be made? Also prove that this optimal policy in superior to the straight forward policy of replacing each fuses only when it fails.

4) An electrical appliance manufacturer wishes to know what the economic quantity should be for a plastic impeller when the following information is available. The average daily requirement is 120 units and the company has 250 working days a year. The manufacturing cost is 50 paise per part. The sum of the annual rate of interest , insurance ,taxes and so for this 20% of the unit cost , and the cost of preparation is Rs 50 per lot. 5) A manufacture requires 15000 units of a part annually for an assembly operation. The manufacturer can be produce this part at the rate of 100 units per day, and the set up cost for each production run is Rs 24. To hold one unit of this part is inventory cost the manufacturer Rs 5 per year. Assuming 250 working days per year, what will be the optimum manufacturing quantity?

6) A contractor undertakes to supply diesel engines to a truck manufacturer at the rate of Rs 25 per day. There is a clause in the reanalyzing him Rs 10 per engine per day late for missing the scheduled delivering date. He finds that the cost of holding a complete engine in stock is Rs 16 per month. His production process is such that each month he

starts a batch of engines through the shops, and all these engines are available for delivery any time after the end of the month. What should his inventory level be at the beginning of each month? 7) A dealer supplies you the following information with regard to a product dealt with by him: Annual demand = 10000 units Ordering cost =Rs 10 per order, inventory carrying cost =20% of the value of the inventory per year price = 20 per unit. Dealer is considering the possibility of allowing some back order to occur. He has estimated that the annual cost of back ordering will be 25% of the value of inventory. a) What should be the optimum no of units of the product he should buy in one lot? b) What quantity of the product should he allow to be back ordered, if any? c) What will be the maximum quantity of inventory at any time of the year? d) Would you recommend to him to allow back ordering? If so what would be the annual cost saving by adopting the policy of backordering?

8) A shopkeeper has a uniform demand of an item at the rate of 50 items per month. he buys from supplier at a cost of Rs 6 per item and the cost of ordering is Rs 10 each time. If the stock holding costs are 20% per year of stock value, how frequently should be replenish his stocks? Now suppose the supplier offers a 5% discount on orders between 200 and 999 items and a 10% discount on orders exceeding or equal to 1000 can the shop keeper reduce his cost by taking advantage of either of these discounts?