You are on page 1of 87

Instructors Solutions Manual for

Additional Problems


Operations
Management





E I G H T H
E D I T I O N


Principles of
Operations
Management








S I X T H
E D I T I O N








Upper Saddle River, New Jersey 07458

JAY HEIZER

Texas Lutheran University

BARRY RENDER

Rollins College
















VP/Editorial Director: Jeff Shelstad
Executive Editor: Mark Pfaltzgraff
Senior Managing Editor: Alana Bradley
Senior Editorial Assistant: Jane Avery















Copyright 2006 by Pearson Education, Inc., Upper Saddle River, New Jersey, 07458.
Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This
publication is protected by Copyright and permission should be obtained from the publisher prior
to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any
means, electronic, mechanical, photocopying, recording, or likewise. For information regarding
permission(s), write to: Rights and Permissions Department.

Pearson Prentice Hall
TM
is a trademark of Pearson Education, Inc.

10 9 8 7 6 5 4 3 2 1
iii
Contents

Homework Problem Answers

Chapter 1 Operations and Productivity ........................................................................... A-1
Chapter 3 Project Management ....................................................................................... A-3
Chapter 4 Forecasting ...................................................................................................... A-7
Chapter 5 Design of Goods and Services ...................................................................... A-11
Chapter 6 Managing Quality ......................................................................................... A-15
Supplement 6: Statistical Process Control ............................................................................ A-18
Chapter 7 Process Strategy ............................................................................................ A-20
Supplement 7: Capacity Planning ......................................................................................... A-23
Chapter 8 Location Strategies ....................................................................................... A-27
Chapter 9 Layout Strategy ............................................................................................. A-30
Supplement 10: Work Measurement ...................................................................................... A-34
Chapter 12 Inventory Management ................................................................................. A-36
Chapter 13 Aggregate Planning ...................................................................................... A-42
Chapter 14 Materials Requirements Planning (MRP) & ERP ........................................ A-46
Chapter 15 Short-Term Scheduling ................................................................................. A-51
Chapter 16 Just-In-Time and Lean Production Systems ................................................. A-55
Chapter 17 Maintenance and Reliability ......................................................................... A-57
Module A: Decision Making Tools ................................................................................ A-59
Module B: Linear Programming ..................................................................................... A-64
Module C: Transportation Modeling .............................................................................. A-70
Module D: Waiting Line Models .................................................................................... A-75
Module E: Learning Curves ........................................................................................... A-79
Module F: Simulation ..................................................................................................... A-80























A-1

1
CHAPTER


Operations and
Productivity





1.1 a.

( )( ) ( )( )
( )( ) ( )( )
Last years
number of units of output
total factor
total dollar value of all inputs used
productivity
12, 000 units
12, 000 $2.00 14, 000 $10.50
2, 000 $8.00 4, 000 $0.70 $30, 000
12, 000 units
$219, 800
! "
# $
=
# $
# $
% &
=
' + +
(
) + +
*
= 0.0546 units dollar =


b.

( ) ( ) ( )( )
( )( ) ( )( )
This years
number of units of output
total factor
total dollar value of all inputs used
productivity
14, 000 units
14, 000 $2.05 16, 000 $11.00
1, 800 $7.50 3,800 $0.75 $26, 000
14, 000 units
$247, 050
! "
# $
=
# $
# $
% &
=
' + +
(
) + +
*
= 0.0567 units dollar =


c.

This years Last years
total factor total factor
productivity productivity
0.0567 0.0546
100% 100%
Last years 0.0546
total factor
productivity
3.84% 3.8%
! " ! "
# $ # $

# $ # $
# $ # $

% & % &
=
! "
# $
# $
# $
% &
= +


Answer : Total factor productivity increased by 3.798% this year as compared to last year.

A-2
1.2
( ) ( )( )
57, 600
0.15
160 12 L
= , where number L = of laborers employed at the plant.
So
( )( )( )
57, 600
200
160 12 0.15
L = =
Answer : 200 laborers

1.3 Output 28, 000 customers =
There are 4 approaches to solving the problem correctly:
1. Input 7 workers =
Then,
28, 000
4, 000 customers worker
7
=
2. ( ) Input 7 40 labor weeks =
Then,
( )
28, 000
100 customers labor week
7 40
=
3. ( )( ) Input 7 40 50 labor hours =
Then,
( )( )
28, 000
2 customers labor hour
7 40 50
=
4. ( )( ) Input 7 40 $250 dollars of worker wages =
Then,
( )( )
28, 000
0.40 customers per dollar of labor
7 40 $250
=

1.4
( )( )
6, 600 Cadillacs
0.10
labor hours
66, 000 labor hours
x
x
=
=

There are 300 laborers. So,

66, 000 labor hours
220 labor hours laborer
300 laborers
=

1.5
( ) ( )
( )
52 $90 198 $80
$ output 20, 520
$57.00
labor hour 8 45 360
+
= = = per labor hour



A-3

3
CHAPTER


Project
Management





3.1
50 100 150 200
A
B
C
D
E
F
G
H
I
Hours
80
150
200
Gantt Chart
20
120
110
140
170
160


3.2 AON Network:


60
B
Purchasing
30
D
Sawing
20
A
Planning
100
C
Excavation
20
E
Placement
10
F
Assembly
20
G
Infill
10
H
Outfill
30
I
Decoration


A-4
3.3 AOA Network:


Plan
1
Purchase
2
Saw
3
Place
4
Assemble
5
Outfill
6
Decorate
8 9
7
Excavate
Infill Dummy
A B D E
C
F
G
H
I


3.4 Path Task Times (Hours) Total Hours
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 8 9
1 2 4 5 6 7 8 9
1 2 4 5 6 8 9
20 + 60 + 30 + 20 + 10 + 20 + 0 + 30
20 + 60 + 30 + 20 + 10 + 10 + 30
20 + 100 + 20 + 10 + 20 + 0 + 30
20 + 100 + 20 + 10 + 10 + 30
190
180
200
190

The longest path clearly is 1 2 4 5 6 7 8 9; hence, this is the critical path, and the
project will end after 200 hours.


Planning
1
Excavate
Purchasing
2
LF = 90
LS = 30
EF = 80
ES = 20
Sawing
3
LF = 120
LS = 90
EF = 110
ES = 80
Placement
4
LF = 140
LS = 120
EF = 140
ES = 120
LF = 20
LS = 0
EF = 20
ES = 0
Assembly
5
LF = 150
LS = 140
EF = 150
ES = 140
Outfill
6 8
7
LF = 170
LS = 160
EF = 160
ES = 150
Infill Dummy
LF = 170
LS = 150
EF = 170
ES = 150
Decoration
9
LF = 200
LS = 170
EF = 200
ES = 170
LF = 120
LS = 20
EF = 120
ES = 20
A
B
C
D E
F
G H
I


Answer : The critical path therefore is A C E F G I (200 hours). The activities that
can be delayed include ones with slack times > 0. Thus, B (10 hours), D (10 hours), and
H (10 hours) can be delayed.

A-5

3.5
( )
( )
( )
( )
2
2
2
2
2
4
Mean: Variance Standard Deviation
6 6 6
20
120 20
A: 20 A: 11.11 A: 3.33
6 36 6
60
360 60
B: 60 B: 100.00 B: 10.00
6 36 6
120
600 120
C: 100 C: 400.00 C: 20.00
6 36 6
10
180 10
D: 30 D: 2.78 D: 1.67
6 36 6
a m b b a b a + + ! " ! " ! "
# $ # $ # $
% & % & % &
= = =
= = =
= = =
= = =
( )
( )
( )
( )
( )
2
2
2
2
2
10
120 10
E: 20 E: 2.78 E: 1.67
6 36 6
0
60 0
F: 10 F: 0.00 F: 0.00
6 36 6
40
120 40
G: 20 G: 44.44 G: 6.67
6 36 6
4
60 4
H: 10 H: 0.44 H: 0.67
6 36 6
40
180 40
I : 30 I : 44.44 I : 6.67
6 36 6
= = =
= = =
= = =
= = =
= = =


3.6 Since the critical path is A C E F G I, only those variances are along the critical
path are used.
Therefore, the variances along critical path are 11.11, 400, 2.78, 0, 44.44, and 44.44 . So
the sum of these variances 502.77 = .
Thus, the project completion standard deviation 502.77 22.4 = .
= mean time of critical path 200 hrs =
22.4 hrs =
The z value
240 200 40
1.8
22.4 22.4

= = = . Using the cumulative normal distribution table in


Appendix I of the text, we observe that 96.4 percent of the distribution lies to the left of 1.8
standard deviations. Hence, there is a 100 96.4 3.6% = chance that it will take more than
240 hrs to build the garden/picnic area.

A-6
3.7 The critical path is A C E F G I. Hence, the project completion variance
11.11 400 2.78 0 44.44 44.44 502.77. = + + + + + =
So, the project completion standard deviation 502.77 22.4 = .
The cumulative normal distribution tells us that 90% of the area lies to the left of 1.29
standard deviations. Therefore, amount of time to build the garden/picnic area should be
( ) 200 22.4 1.29 200 29 229 hours + = + = .

3.8 a. Activity on Nodes Diagram of the project.


A
1
B
1
C
4
E
2
F
2


b. The critical path, listing all critical activities in chronological order:

( ) A B E F 1 1 2 2 6
A C F 1 4 2 7. This is the CP.
not CP + + + =
+ + =

c. The project duration (in weeks):
7 (This is the length of CP.)
d. The slack (in weeks) associated with any and all non-critical paths through the
project: Look at the paths that arent criticalonly 1 hereso from above:
A B E F 7 6 1 = week slack.

3.9 We have only 1 activity with probabilistic duration.

( ) 8 1 4 2
Due date 1
2
0.5 0.5
Z

+ +

= = = = (length of entire path is 7, not 4). For a 2 z = ,


this means ( ) Due date 8 97.72% P < = (table lookup) for the path so chance of being OVER
8 weeks is 2.28% (and we know non-CP path will be only 6 weeks)

3.10 Helps to modify the AON with the lowest costs to crash
1. CP is A C F ; C is cheapest to crash, so take it to 3 wks at $200.
(and $200 < $250)
2. Now both paths through are critical. We would need to shorten A or F, or shorten C
and either B/E. This is not worth it, so we would not bother to crash any further.

A-7

4
CHAPTER



Forecasting





4.1 ( ) Present period week 6. =
So: ( ) ( ) ( ) ( )
7 6 5 4 3
1 1 1 1 1 1 1 1
52 63 48 70
3 4 4 6 3 4 4 6
F A A A A = + + + = + + + 56.75 patients =

4.2
1 120
2 136
3 114 128
4 116 125
t t
t A F



120 136 256
128
2 2
Checking Data
136 114 250
125
2 2
+ +
= =
,
,
-
+
,
= =
,
.


5
116 114 230
115 Answer
2 2
F
+
= = = =

4.3 Method 1: MAD: 0.20 0.05 0.05 0.20 0.5000 better + + + =
MSE: 0.04 0.0025 0.0025 0.04 0.0850 + + + =
Method 2: MAD: 0.1 0.20 0.10 0.11 0.5100 + + + =
MSE: 0.01 0.04 0.01 0.0121 0.0721 better + + + =

A-8
4.4 y a bx = +

4
1
2
1
58, 538
75.75
191.5
23, 209
i i
i
n
i
i
x y
x
y
x
=
=
=
=
=
=
/
/


( ) ( )
( )
( )
2
58, 538 4 75.75 191.5
513.50
2
256.75
23, 209 4 75.75
191.5 2 75.75 40
40 2
85
210
b
a
y x
x
y

= = =

= =
+
=
0


4.5
t

Day
Actual
Demand
Forecast
Demand

1 Monday 88 88
2 Tuesday 72 88
3 Wednesday 68 84
4 Thursday 48 80

5 Friday

72 Answer


( )
1
1
t t t
F A F
+
= + . Let
1
4
= . Let Monday forecast demand = 88

( ) ( )
( ) ( )
( ) ( )
( ) ( )
2
3
4
5
1 3
88 88 88
4 4
1 3
72 88 18 66 84
4 4
1 3
68 84 17 63 80
4 4
1 3
48 80 12 60 72
4 4
F
F
F
F
= + =
= + = + =
= + = + =
= + = + =



A-9

4.6
Winter Spring Summer Fall
2001 1, 400 1,500 1, 000 600
2002 1, 200 1, 400 2,100 750
2003 1, 000 1,600 2, 000 650
2004 900 1,500 1,900 500
4, 500 6,000 7,000 2,500

Average over all seasons:
20, 000
1, 250
16
=
Average over spring:
6, 000
1, 500
4
=
Spring index:
1, 500
1.2
1, 250
=
( )
5,600
Answer : 1.2 1, 680
4
! "
=
# $
% &
sailboats

4.7 We need to find the smoothing constant . We know in general that ( )
1
1
t t t
F A F
+
= + ,
1, 2, 3 t = . Choose either 2 t = or 3 t = ( 1 t = wont let us find because
( ) ( )
2
50 50 1 50 F = = + holds for any ). Lets pick, e.g., 2 t = . Then
( ) ( )
3
48 42 1 50 F = = + . So


48 42 50 50
2 8
1
.
4

= +
=
=


Now we can find
5
F : ( ) ( )
5
46 1 50 F = + , with
1
4
= . So
( ) ( )
5
1 3
46 50 49 Answer
4 4
F = + =

A-10
4.8 Let
1 2 6
, , , X X X ! be the prices;
1 2 6
, , , Y Y Y ! be the number sold.

6
1
Average price 3.25833
6
i
i
X
X
=
= = =
/
(1)

6
1
Average number sold 550.00
6
i
i
Y
Y
=
= = =
/
(2)
All calculations to the
1
nearest th
100, 000
! "
# $
# $
# $
% &


6
1
9, 783.00
i i
i
X Y
=
=
/
(3)

6
2
1
67.1925
i
i
X
=
=
/
(4)
Then y a bx + , where number sold y = , price x = , and


( ) ( )
( )
( ) ( )( )
( )
( ) ( )
6
1
6 2
2
2
1
9, 783 6 3.25833 550
969.489
277.61395
3.49222
67.1925 6 3.25833
1, 454.5578
i i
i
i
i
X Y n X Y
b
X n X
a Y b X
=
=


= = = =

= =
/
/


So at 1.80 x = , ( ) 1, 454.5578 277.61395 1.80 954.85270 y = = . Now round to the nearest
integer: Answer : 955 dinners

4.9 Tracking Signal
( )
1
MAD
n
t t
t
A F
=

=
/


Month
t
A
t
F
t t
A F ( )
t t
A F
May 100 100 0 0
June 80 104 24 24
July 110 99 11 11
August 115 101 14 14
September 105 104 1 1
October 110 104 6 6
November 125 105 20 20
December 120 109 11 11
Sum: 87 Sum: 39
So:
87
MAD: 10.875
8
=

39 1
Answer : 3.586 to the nearest th
10.875 1,000
! "
=
# $
% &

A-11

5
CHAPTER


Design of Goods
and Services





5.1
$27,500
$27,500
Use K1
(0.80)
(0.20)
90 of 100
non-defect
70 of 100
non-defect
$42,500
$32,500
$4,062.50
(0.85)
(0.15)
90 of 100
non-defect
75 of 100
non-defect
$12,500
$43,750
Use K2
$24,375
(0.90)
(0.10)
95 of 100
non-defect
80 of 100
non-defect
$18,750
$75,000
Use K3

Answer: $27,500use K1

Outcome Calculations


( )( )( ) ( )( )( )
90 10
$100, 000 500 300 $1.20 500 300 $1.30
100 100
$100, 000 $162, 000 $19, 500 $42, 500
1
+ =
,
2
,
+ =
3


( )( ) ( )( )
70 30
$100, 000 150, 000 $1.20 150, 000 $1.30
100 100
$100, 000 $126, 000 $58, 500 $32, 500
1
+ =
,
2
,
+ =
3

A-12

( )( ) ( )( )
90 10
$130, 000 150, 000 $1.20 150, 000 $1.30
100 100
$130, 000 $162, 000 $19, 500 $12, 500
1
+ =
,
2
,
+ =
3


( )( ) ( )( )
75 25
$130, 000 150, 000 $1.20 150, 000 $1.30
100 100
$130, 000 $35, 000 $48, 750 $43, 750
1
+ =
,
2
,
+ =
3


( )( ) ( )( )
95 5
$180, 000 150, 000 $1.20 150, 000 $1.30
100 100
$180, 000 $171, 000 $9, 750 $18, 750
1
+ =
,
2
,
+ =
3


( )( ) ( )( )
80 20
$180, 000 150, 000 $1.20 150, 000 $1.30
100 100
$180, 000 $144, 000 $39, 000 $75, 000
1
+ =
,
2
,
+ =
3


5.2
84.0 84.0
Use D1
(0.4)
F market
99.0
(0.6)
U market
74.0
66.0
(0.3)
F market
80.0
(0.7)
U market
60.0
80.2
(0.6)
F market
89.2
(0.4)
U market
66.7
Use D0
Use D2
(All $ figures in millions in tree)



( )
( )
( )
( )
( )
( )
$ Profits : D0 F: 1, 000 80, 000 $80, 000, 000
D0 U: 750 80, 000 $60, 000, 000
D1 F: 1, 000 100, 000 1, 000, 000 $99, 000, 000
D1 U: 750 100, 000 1, 000, 000 $74, 000, 000
D2 F: 1, 000 90, 000 800, 000 $89, 200, 000
D2 U: 750 90, 000 800
=
=
=
=
=
, 000 $66, 700, 000 =

Answer : Answer: Design D1 has an expected profit of $84,000,000.

A-13
5.3
$14,000
$10,000
(0.3)
Demand rises $30,000
$20,000
Purchase
overhead hoist
(0.5)
Demand stays
same
(0.2)
Demand falls
$10,000
$14,000
(0.4)
Demand rises $20,000
(0.6)
Demand stays
same
$10,000
Purchase
forklift
$0
Do
nothing


Answer : Maximum expected payoff $14, 000 =

5.4
Low demand (0.4)
$380,000
Upgrade to D
160K $50,000
Use A Low demand (0.4)
$300,000
High demand (0.6)
180K $0
$300,000
High demand (0.6)
Use B
302K
$250,000
High demand (0.6) Use C
380K
$0
No upgrade to D
Low demand (0.4)
$0
Do nothing
Note: K = $1,000s


Answer : Use Design C. If demands turns out to be low, upgrade to Design D.

A-14
5.5
Bread & Rolls
Pies & Cakes
Support
Support
No support
No support
Bread & Rolls
Support
No support
Full Service


5.6
Bread & Rolls
Pies & Cakes
$15,000
$10,000
Bread & Rolls
Full Service
Support ( = 0.40)
No support ( = 0.60)
EMV = $12,000
$25,000
$5,000
Support ( = 0.40)
No support ( = 0.60)
EMV = $13,000
$35,000
$10,000
Support ( = 0.40)
No support ( = 0.60)
EMV = $7,500
p
p
p
p
p
p


Based upon this decision tree, Jeff should consider most seriously the medium-sized shop
carrying bread, rolls, pies, and cakes.



A-15

6
CHAPTER


Managing
Quality





6.1 1. Appearance of food
2. Portion size
3. Lighting
4. Speed of service
5. Knowledge of server
6. Quality of service
7. Appearance of room
8. Appropriate amount of space
9. View of stage and audio

Item Overall Grade
Rated A B C D E
1. 20 28 1 1 0
2. 4 2 30 14 0
3. 19 20 3 8 0
4. 4 5 25 5 11
5. 0 0 27 18 7
6. 9 30 7 0 4
7. 19 18 13 0 0
8. 0 26 24 0 0
9. 0 0 0 20 30

Item Weights
Rated 4 3 2 1 0 Total Average
1. 80 84 2 1 0 167 2.61
2. 16 6 60 14 0 96 1.50
3. 76 60 6 8 0 150 2.34
4. 16 15 50 5 0 86 1.34
5. 0 0 54 18 0 72 1.13
6. 36 90 14 0 0 140 2.19
7. 76 54 26 0 0 156 2.44
8. 0 78 48 0 0 126 1.97
9. 0 0 0 20 0 20 0.31

a. Highest rated is appearance of food; 2.61.
b. Lowest rated is view of stage; 0.31.
A-16
c. A check sheet will help categorize the comment cards

Check Sheet
Positive Negative
Appearance of food
Portion size ! ! ! ! !
Lighting !
Speed of service ! !
Knowledge of server !
Quality of service ! !
Appearance of room
Appropriate amount of space !
View of stage and audio ! ! ! ! ! !
Other ! ! ! ! ! chilly

d. The written comments are not always consistent: Portion size is highly rated in
comments, but 5th in overall grade. View/audio is lowest rated in both.

6.2 a.
8
9
10
11
12
13
14
1 2 3 4 5 6
x
y
minutes
Trips 0


b. This is a scatter diagram.

A-17

6.3 a.
5
10
15
20
25
30
35
W R I M O
40
0
2
4
6
10
14
24
30
34
36


b. 39% of complaints are W, demeaning towards women.

6.4
mislabeled
Manpower
Incorrect
measurement
Operator
misreads display
Inadequate
cleanup
Technician
calculation off
Machines
Temperature
controls off
Variability
Antiquated
scales
Inadequate
flow controls
Equipment
in disrepair
Incorrect
Formulation
Materials
Jars
Incorrect
weights
Damaged
raw material
instructions
Methods
Lack of clear
Priority
miscommunication
Incorrect
maintenance
Inadequate instructions


A-18

6
SUPPLEMENT


Statistical Process
Control





S6.1 We are given a target of 420 X = . So
25
LCL 420 4 400
25
X Z
n
! " ! "
= = =
# $ # $
% & % &
.
25
UCL 420 4 440
25
X Z
n
! " ! "
= + = + =
# $ # $
% & % &
. Thus,

Answer : LCL 400 calories
UCL 440 calories
=
=


S6.2
7 5 9
250 250 250
7 5 9 300
0.040
30 7, 500 7, 500
p
+ + + + + +
= = = =
" "


( )
( )
( )
( )
1
UCL 0.040 3 0.01239 0.077
1
LCL 0.040 3 0.01239 0.003
p p
p Z
n
p p
p Z
n

= + = + =

= = =


S6.3 We want 2 Z = , since ( ) 1 0.0455 0.9545 = which implies 2 Z = from the Normal Table.
UCL 2 c c = + , where average number of breaks 3: 3 2 3 6.46 c = = + = .

S6.4 3 Z = for -chart x . Here, 4 n = so
2
0.729 A = (from Table S6.1). 2.0 x = , 0.1 R = ,
( )
2
UCL 2.0 0.729 0.1 2.07
x
x A R = + = + =

S6.5 C chart
0.0027



1.0000 0.0027 0.9973
0.49865 3
2 2
Z

= = 0 = (see Normal Table)


UCL 3 1.5 3 1.5 5.17 c c = + = + =
A-19
S6.6 answers x Z
n
! "
=
# $
% &


384
16 lbs.
24
0.12
2 0.08
3
16.00 0.08 16.08 UCL
16.00 0.08 15.92 LCL
x
x
x
Z
n

= =
! " ! "
= =
# $ # $
% & % &
+ = =
= =


S6.7 1.00 x = , 0.10 R = ,
2
0.483 A = (from Table S6.1),
( )( )
2
LCL 1 0.483 0.10 0.9517 x A R = = = weeks

S6.8 3.25 R = mph, 3 Z = , with 8 n = , from Table S6.1,

UCL 1.864 6.058
LCL 0.136 0.442
R
R
= =
= =


S6.9
30
Number of defects
250
1
300
0.04
30 7, 500
i
p
=
= = =
/
, 250 n =

( )( )
( )
( ) ( )
( )
0.04 0.96
UCL 2 0.04 2 0.0124 0.0648
250
0.04 0.96
LCL 2 0.04 2 0.0124 0.0152
250
p
p
p
p
= + = + =
= = =


S6.10 a. We are counting attributes and we have no idea how many total observations there are
(the proportion of drivers who werent offended enough to call!) This is a C-chart.
b. Use mean of 6 weeks of observations
36
6
6
= for c , as true c is unknown.
( ) UCL 6 3 2.45 13.3 c z c = + = + =
( ) LCL 6 3 2.45 1.3 c z c = = = , or 0.
c. It is in control because all weeks calls fall within interval of [ ] 0, 13 .
d. Instead of using
36
6
6
= , we now use 4 c = . ( ) UCL 4 3 4 4 3 2 10 = + = + = .
( ) LCL 4 3 2 2 = = , or 0. Week 4 (11 calls) exceeds UCL. Not in control.

A-20

7
CHAPTER


Process
Strategy





7.1 a. Find breakeven points,
p
X .
Mass Customization: 1, 260, 000 60 120 21, 000
p
X X X + = =
Intermittent: 1, 000, 000 70 120 20, 000
p
X X X + = =
Repetitive: 1, 625, 000 55 120 25, 000
p
X X X + = =
Continuous: 1, 960, 000 50 120 28, 000
p
X X X + = =
b. Find least-cost process at 24, 000 units X = .
Fixed cost VC Units
Mass Customization: ( ) 1, 260, 000 60 24, 000 2, 700, 000 + =
Intermittent: ( ) 1, 000, 000 70 24, 000 2, 680, 000 + =
Repetitive: ( ) 1, 625, 000 55 24, 000 2, 945, 000 + =
Continuous: ( ) 1, 960, 000 50 24, 000 3,160, 000 + =
The least-cost process: Intermittent Process.

c.
Anticipated Intermittent
Production Process
Volume Breakeven Point
24,000 20,000 ? yes! >
#$% #$%

Annual Profit Using Intermittent Process: ( ) $ 120 24, 000 2, 680, 000 $200, 000 ' ) =
( *

Answer : The intermittent process will maximize annual profit.
Annual Profit: $200,000

A-21
7.2 Use a crossover chart. First graph. Then solve for breakpoint(s).


5
1
2
3
10 15 20 25
V
R
MC
0
0
1,000s of Ovens
I
P2 P1
Cost
(Millions
of dollars)


Finding value of P2: ( ) ( ) 1, 250, 000 50 P2 2, 000, 000 5 P2 + = + . So
2
3
P2 16, 666 units = .
(Note: P1 12, 500 = ).
Answer : For volumes of production V such that
2
3
16, 666 25, 000 V .

7.3
2
4
6
8
10
12
14
5,000 15,000
V Volume
10,000 20,000
I
R
C
I
R
C
Cost
(millions)
7,500
0
0



( )
1, 000, 000 1, 650 3, 000, 000 1, 250
400 2, 000, 000
I&R
5, 000
Intersect
1, 000, 000 1, 650 5, 000 $9, 250, 000
x x
x
x
+ = + 1
,
=
,
2
=
,
,
+ =
3


( )
3, 000, 000 1, 250 7, 500, 000 650
600 4, 500, 000
R&C
7, 500
Intersect
3, 000, 000 1, 250 7, 500 $12, 375, 000
x x
x
x
+ = + 1
,
=
,
2
=
,
,
+ =
3

For all V between 5, 000 7, 500 V
A-22
7.4 Breakeven points
a. : 21, 000, 000 450 750 70, 000 R x x x + = 0 =
: 26, 250, 000 400 750 75, 000 C x x x + = 0 =
: 15, 000, 000 500 750 60, 000 M x x x + = 0 =
b. Least cost process at 65, 000 x =
Cost
R: $50,250,000
C: $52,250,000
M: $47,500,000 lowest cost with Mass Customization
c. 65,000 demand > 60,000 breakeven for M

7.5 Breakeven points
a. Continuous : 2, 400, 000 20 80 40, 000 x x x + = 0 =
Repetitive : 1, 950, 000 30 80 39, 000 x x x + = 0 =
Mass Customization : 1, 480, 000 40 80 37, 000 x x x + = 0 =
Intermittent : 1, 800, 000 40 80 45, 000 x x x + = 0 =
b. Least cost process at 48, 000 x =
Continuous: $3,360,000 least cost
Repetitive: $3,390,000
Mass Customization: $3,400,000
Intermittent: $3,720,000
c. Is 48,000 > 40,000? Yes, so we use continuous process. Annual profit $480, 000 =

7.6
4,000 11,000
Volume
15,000
I
R
C
$
2,000
M
(11,000; 1,350,000)
(4,000; 860,000)
(2,000; 300,000)
widest


Repetitive has the widest production volume range over which it is a least-cost process.

7.7 Total profit now:
Profit 40, 000 2.00 20, 000 40, 000 0.75 80, 000 20, 000 30, 000 30, 000 = = =
Total profit with new machine:
Profit 50, 000 2.00 2, 000 50, 000 1.25 100, 000 25, 000 62, 500 12, 500 = = =
Since profit decreases with the new piece of equipment added to the line, purchase of the
machine probably would not be a good investment.
A-23

7
SUPPLEMENT


Capacity
Planning





S7.1 Problem is under risk and has two decisions, so use a decision tree:


109
High demand
70
135
(0.6)
Medium demand
(0.4)
No additional expansion
90
135
Additional minor expansion
148
High demand
(0.6)
Medium demand
(0.4)
40
220
148
Small
expansion
Large
expansion


(Payoffs and Expected Payoffs are in $1,000s)
Answer : Ralph should undertake a large expansion. Then the annual expected profit will
equal $148,000.

A-24
S7.2
High demand
140,000
(0.3)
No additional
$90,000
$140,000
70,000
$70,000
Small
expansion
Large
expansion
minor expansion
Additional
minor expansion
Medium demand
(0.7)
$40,000
High demand
(0.3)
14,000
Medium demand
(0.7)
$105,000
$25,000


Maximum value = $70,000

S7.3
$18,000
Small
expand
Demand up
small (0.4)
16,000
Demand up
medium (0.6)
$10,000
$20,000
$0
No
expand
Demand up
medium (0.3)
18,000
Demand up
large (0.7)
$10,000
$34,000
Large
expand

Answer : $18,000

A-25
S7.4
(1)
50,000
100,000
200,000
300,000
400
x
1,000 2,000
(1)
250
(2)
(1)
(2)
(3)
(3)
(2)

Cap level (2) is lowest for all x so 1, 000 2, 000 x

S7.5 Actual (or expected)
Effective Capacity
Output =
Efficiency
(text Equation S7-3)
4.8 cars = 5.5 cars 0.880. Therefore in one 8 hour day one bay accommodates 38.4 cars =
( ) 8 hrs 4.8 cars per hr and to do 200 cars per day requires 5.25 bays or 6 bays =
200 cars
38.4 cars per bay
! "
# $
% &


S7.6 a. ( )
( )
450
BEP $ 878.05
0.5125 1
i i i
F
V P W
= = =
' )
( *
/

Breakeven ( ) $ $878.05 =
b. Number of pizzas required at breakeven:
Whole pizzas ( ) 878.05 0.30 5.00 52.7 53 = =
Slices ( ) 878.05 0.05 0.75 58.5 59 = =
Whole pizzas to make slices 59 6 9.8 10 = =
Therefore, he needs a total of 63 pizzas. He does not have sufficient capacity.

S7.7 a. Remember that Yr 0 has no discounting.

Initial coat $1,000,0000 yearly maint 75,000 members dues/member
Salvage cost $50,000 yearly dues $300,000 500 $600
Discount rate 0.100

Year Cost Revenues Profit PV Mult PV Profit
0 $1,075,000 $300,000 $775,000 1 $775,000
1 75,000 300,000 225,000 0.9 $202,500
2 75,000 300,000 225,000 0.81 $182,250
3 75,000 300,000 225,000 0.729 $164,025
4 75,000 300,000 225,000 0.6561 $147,623
5 75,000 350,000 275,000 0.59049 $162,385
undisc. Profit 400,000 PV Profit $83,782
A-26
Assume dues are collected at the beginning of each year. This is a simplificationin
reality, people are likely to join throughout the year. (Technically, if equipment is
sold at the end of year 5, it should probably appear as a final revenue stream in year 6
but the difference is only $2,952.45.
b. Special deal comparison: $3,000 for all 6 years. Compare the PV cash stream of
yearly dues from one member to that of the deal. Since we specified the club will
always be full, we can make the assumption that the member (or her replacement)
will always be paying the annual fee.

Initial cost $0 yearly maint $0
Salvage cost $0 yearly dues $600
Discount rate 0.100

(Membership fee)
Year Cost Revenues Profit PV Mult PV Profit
0 $0 $600 $600 1 $600
1 0 600 600 0.9 $540
2 0 600 600 0.81 $486
3 0 600 600 0.729 $437
4 0 600 600 0.6561 $394
5 0 600 600 0.59049 $354
undisc. Profit 3,600 PV Profit $2,811

Since this is less than $3K, the special deal is worth more to the Health Club. Note
also: If Health Club member is using same discount rates, its better for her to pay
yearly.

S7.8 Breakeven:
Costs = Revenues
500 0.50 0.75 b b + = where b = number of units at breakeven or ( ) 0.75 0.50 500 b = ,
and
500
2, 000 units
0.25
b = =
a. breakeven in units = 2,000 units
b. breakeven in dollars = $0.75 2, 000 $1, 500 =
A-27

8
CHAPTER


Location
Strategies





8.1
( ) ( ) ( )( ) ( )( ) ( )( )
( ) ( ) ( )( ) ( ) ( )
2, 000 2.5 5, 000 2.5 10, 000 5.5 7, 000 5.0
10, 000 8.0 20, 000 7.0 14, 000 9.0
6.67
2, 000 5, 000 10, 000 7, 000 10, 000 20, 000 14, 000
x
C
+ + +
+ + +
= =
+ + + + + +


( )( ) ( )( ) ( )( ) ( )( )
( )( ) ( )( ) ( )( )
2, 000 4.5 5, 000 2.5 10, 000 4.5 7, 000 2.0
10, 000 5.0 20, 000 2.0 14, 000 2.5
3.02
68, 000
y
C
+ + +
+ + +
= =

8.2 Site Total Weighted Score
A 174
B 185
C 187
D 165

8.3 Population weights 5, 000 =
/


( ) ( ) ( ) ( ) ( )( ) ( ) ( ) ( )( ) ( )( ) 0 2, 050 1 550 2 1, 025 3 775 2 250 2 350
0.525
5, 000
x
C
+ + + + +
= =

( )( ) ( )( ) ( )( ) ( ) ( ) ( ) ( ) ( )( ) 0 2, 050 1.5 550 1 1, 025 3 775 3 250 1 350
0.205
5, 000
y
C
+ + + + +
= =
Coordinates: ( ) 0.525, 0.205

8.4
25
50
75
100
125
150
1 2 3 4 5 6
V
$ cost
(millions)
(2, 60)
(1, 35)
(1/2, 30)
(0, 25)
(0, 20)
(0, 10)
10,000s of Autos = V
0
A
B
C

For all V such that 10, 000 60, 000 V .
A-28

8.5 Site Score
A 5 320 w+
B 4 330 w+
C 3 370 w+
D 5 255 w+

Find all w from 130 so that:


3 370 5 320 50 2 25
3 370 4 330 40 40
3 370 5 255 115 2 57.5
w w w w
w w w w
w w w w
+ +
+ +
+ +


Answer : For all w such that 1.0 25.0 w

8.6
2
4
6
8
10
12
5 10 15 20 25 30
V
TC
(millions $)
(1, 35)
(30, 9.5)
(20, 7)
35 (thousands)
L.A.
K.C.
Charlotte
Char
K.C.
L.A.
cutoff
0



4,100, 000 180 1, 000, 000 300
For all so: 4,100, 000 180 2, 000, 000 250
0 35, 000
3,100, 000 120
2,100, 000 70
0 35, 000
1
25, 833
Answer : 30, 000 35, 000 3
30, 000
V V
V V V
V
V
V
V
V
V
V
+ + 1
,
+ +
2
,

3
1
,

2
,

3
1

,
0
2
,

3


A-29
8.7 weights 14, 000 =
/
(or 14 for calculations below)

( )( ) ( ) ( ) ( ) ( ) 2 3.5 8 7 6 3.5
6.0
14
x
C
+ +
= =

( )( ) ( )( ) ( )( ) 6 3.5 1 7 2 3.5
2.5
14
y
C
+ +
= =






A-30

9
CHAPTER


Layout
Strategy





9.1 a.
( )( ) 60 60 sec
3, 600
Cycle time 20 sec per PLA
180 PLAs 180
= = =
b. Theoretical number of work stations
task time
60
3
cycle time 20
= = =
/

c. Yes, it is feasible.

9.2
1 2
3 4
D A
C B


Department pair

( )
( ) ( )
( ) ( )
( )( )
( )( )
( )( )
( ) ( )
1
2
1
2
1
2
1
2
1
2
1
2
Weekly
$
Cost
: 8 800 3, 200
: 6 700 2,100
: 4 400 800
: 10 300 1, 500
: 7 200 700
: 9 600 2, 700
$11, 000
AB
AC
AD
BC
BD
CD
=
=
=
=
=
=


A-31
9.3 a.
( )
( )
274 seconds
Cycle time Cycle time seconds
i
t
n = =
/


( )
( )
60 60 seconds
C.T. 60 seconds per truck
60 trucks
= = so
274
4.5667 5
60
n n = = = .
Answer : 5
b. Steps 1 and 2: Sample Answer

60 seconds
From (a)
number of stations is at least 5
c = +
-
.

Precedence diagram:


A
40
B
30
D
40
E
6
H
20
C
50
F
25
G
15
I
18
J
30


Step 3


Task
Number of
Successors

Task
Number of
Successors
A 9 F 2
B 4 G 2
C 4 H 1
D 2 I 1
E 2 J 0

A-32
Step 4


Available
Available
and Fit

Assigned

Station 1 A A A
B, C
Station 2 B, C B, C C (Broke a tie)
B, F, G
Station 3 B, F, G B, F, G B
D, E, F, G E, F, G F (Broke ties)
D, E, G
Station 4 D, E, G D, E, G D (Broke ties)
E, G E, G G (Broke a tie)
E, I
Station 5 E, I E, I E
I, H I, H H (Broke a tie)
I I I
J
Station 6 J J J


Answer : Station Tasks
(Other answers possible, 1 A
depending upon how ties 2 C
are broken in above 3 B, F
procedure) 4 D, G
5 E, H, I
6 J

c. 6 work stations are in our answer. n =

( ) ( )
274
Efficiency 0.7611
C.T. 6 60
i
t
n
= = =
/


9.4 a. First assignment costs ( )
1
8, 000 7, 200 1, 600 4, 800 8, 000 800
2
$15, 200
= + + + + +
=

b. New layout costs ( )
1
8, 000 9, 600 6, 400 3, 600 2, 000 800 $15, 200
2
= + + + + + =
No improvementboth yield the same cost.

A-33
9.5 Cost of 3 attempts:

Work Area
Attempt 1 2 3 Cost
a. 1 S D M $1,088
b. 2 D S M $1,142
c. 3 M D S $1,100



( )( ) ( ) ( ) ( )( ) 2 23 10 32 5 20 8 $1,100 ' ) + + =
( *


9.6 a. Theoretical minimum number of stations
task times
cycle time
=
/

Cycle time
60
12 minutes
5
= = . So minimum number of stations
48
4 stations
12
= =

b.
A
10 min
WS #1
B
12 min
WS #2
C
8 min
WS #3
D
6 min
WS #4
E
F
12 min
WS #5


This requires 5 stationsit cannot be done with 4.
c. Efficiency
48 48
80%
5 12 60
= = =

for 5 stations.

9.7 There are three alternatives:

Station Alternative 1 Tasks Alternative 2 Tasks Alternative 3 Tasks
1 A, B, F A, B A, F, G
2 C, D C, D H, B
3 E G, H C, D
4 G, H E E
5 I I I

Each alternative has an efficiency of 86.67%.

A-34

10
SUPPLEMENT


Work
Measurement





S10.1 Required sample size
2
Zs
n
hx
! "
= =
# $
% &
where 0.15 s = , 0.4 x = , 1.96 z = (for 95% confidence),
10% h = accuracy level
( )( )
( )( )
2
1.96 0.15
54.0225 54
0.10 0.4
n
' )
= =
4 5
4 5
( *


S10.2 a.
2
Zs
n
hx
! "
=
# $
% &
Thus,
( )( )
( )
0.10 0.40 12
0.924
0.15
hx n
Z
s
= = =
Referring to Appendix I (Standard Normal Table), Area 0.64 64% = = . The
confidence level when 12 n = is 64%, as opposed to 95% when 54 n = (in
Problem S10.1)
b. Average observed time
0.331 0.243 0.484
0.4484 minutes
12
+ + +
= =
"

Normal time = Average time perf. rating = 0.4484 0.90 0.4036 minutes =
Standard time
Normal time 0.4036
0.429 minutes
1 allowance factor 1 0.06
= = =



S10.3 Average observed time
100 hours 60 minutes 0.75
22.5 minutes
200 units

= =
Normal time 22.5 minutes 1.1 24.75 minutes = =
Standard time for job
Normal time for process 24.75
29.12 minute unit
1 Allowance fraction 1 0.15
= = =



S10.4 a.
sum of times 1.74
Observed time 0.10875 minutes 6.525 seconds
number of cycles 16
= = = =
b.

( ) ( ) Normal time Observed time Performance rating factor 6.525 95%
6.2 seconds
= =
=

c.
normal time 6.2 6.2
Standard time 6.739 seconds
1 allowance factor 1 8% 92%
= = = =



A-35
S10.5 Normal time 10 minutes 0.90 9 minutes = =
Allowance fraction
Personal Fatigue Delay 5 3 1 9
0.15
60 minutes 60 60
+ + + +
= = = =

Normal time 9
Standard time 10.59 minutes
1 Allowance fraction 1 0.15
= = =



S10.6 Observation (Minutes Per Cycle)

Element

Rating

1

2

3

4

5
Average
Time
Normal
Time
1 100% 1.5 1.6 1.4 1.5 1.5 1.5 1.50
2 90% 2.3 2.5 2.1 2.2 2.4 2.3 2.07
3 120% 1.7 1.9 1.9 1.4 1.6 1.7 2.04
4 100% 3.5 3.6 3.6 3.6 3.2 3.5 3.50

Normal time for lab test = 9.11
Standard time for lab test
Normal time for process 9.11
11.1 minutes
1 Allowance fraction 1 0.18
= = =




A-36

12
CHAPTER


Inventory
Management





12.1 An ABC system classifies the top 70% of dollar volume items as A, the next 20% as B, and
the remaining 10% as C items. Similarly, A items constitute 20% of total number of items, B
items are 30%; and C items are 50%.


Item Code Number Average Dollar Volume Percent of Total $ Volume
1289 400 3.75
2347 300 4.00
2349 120 2.50
2363 75 1.50
2394 60 1.75
2395 30 2.00
6782 20 1.15
7844 12 2.05
8210 8 1.80
8310 7 2.00
9111 6
=
=
=
=
=
=
=
=
=
=

1, 500.00 44.0%
1, 200.00 36.0%
300.00 9.0%
112.50 3.3%
105.00 3.1%
60.00 1.8%
23.00 0.7%
24.60 0.7%
14.40 0.4%
14.00 0.4%
3.00 18.00 0.5%
$3, 371.50 100%
=


Answer : The company can make the following classification:
A: 1289, 2347
B: 2349, 2363, 2394, 2395
C: 6782, 7844, 8210, 8310, 9111

12.2 D (Annual Demand) = 4,800 units, P (Purchase Price/Unit) = $27, H (Holding Cost) = $2
S (Ordering Cost) = $30. So, ( )
( )( ) 2 4, 800 30
2
Order Quantity 240
2
DS
Q
H

= = = .

( ) ( )
2 240 30 4, 800
Thus, Total Annual Cost 4, 800 27
2 2 2 240
129, 600 240 600 $130, 440
HQ SD
TC PD
! " ! "
= + + = + +
# $ # $
% & % &
= + + =

A-37
12.3 D (Annual Demand) = 14,558, P (Purchase Price/Unit) = $5, H (Holding Cost/Unit) = $4,
S (Ordering Cost/Order) = $22,
2 2 14, 558 22
400
4
DS
Q
H

= = = tons per order

( )
4 400 22 14, 558
5 14, 558 72, 790 800 800.69
2 2 2 400
$74, 390.69
HQ SD
TC PD
! " ! "
= + + = + + = + +
# $ # $
% & % &
=

Answer : The optimal order quantity ( ) 400 tons order Q = ; total annual inventory cost
( ) $74, 391 TC = .

12.4 D (Annual Demand) = 400 12 = 4,800, P (Purchase Price/Unit) $350 unit = ,
H (Holding Cost/Unit) $35 unit year = , S (Ordering Cost/Order) $120 order = . So,
2 2 4, 800 120
181.42 181
35
DS
Q
H

= = = = units (rounded off).

( ) ( )
35 181 120 4, 800
Thus, Total Cost 4,800 325
2 2 181
1, 560, 000 3,168 3,182 $1, 566, 350
HQ SD
TC PD
Q
! " ! "
= + + = + +
# $ # $
% & % &
= + + =

However, if Bell Computers orders 200 units,
( )
35 200 120 4, 800
4, 800 325 1, 440, 000 3, 500 2, 880 $1, 446, 380
2 200
TC
! " ! "
= + + = + + =
# $ # $
% & % &

Answer : Bell Computers should order 200 units for a minimum total cost of $1,446,380.

12.5
1
2 2 4, 800 120
181 units
35
DS
Q
H

= = =

2
2 2 4, 800 120
188 units
32.5
DS
Q
H

= = =

3
2 2 4, 800 120
196 units
30
DS
Q
H

= = =
181 units cannot be bought at $350, hence that isnt feasible. 196 units cannot be bought at
$300, hence that isnt possible either. So, 188 units EOQ = .
( ) ( )
32.5 188 120 4, 800
Thus, 188 units 325 4, 800
2 2 188
1, 560, 000 3, 055 3, 064 $1, 566,119
HQ SD
TC PD
Q
! " ! "
= + + = + +
# $ # $
% & % &
= + + =

( ) ( )
30 200 120 4,800
200 units 300 4, 800
2 2 200
1, 440, 000 3, 000 2, 880 $1, 445, 880
HQ SD
TC PD
Q
! " ! "
= + + = + +
# $ # $
% & % &
= + + =

Answer : The minimum order quantity is 200 units yet again, since the overall cost of
$1,445,880 is less than ordering 188 units which has an overall cost of $1,566,119.
A-38
12.6 12, 500 year D = , so 50 day d = , 300 day p = , $30 order S = , $2 unit year H =
a.
2 2 12, 500 30 300
612.37 1.095 671
2 300 50
DS p
Q
H p d

= = = =


b. Number of production runs ( )
12, 500
18.63
671
D
N
Q
= = =
c. Maximum inventory level ( )
max
50 1
1 671 1 671 1 559
300 6
d
I Q
p
! "
! " ! "
= = = =
# $ # $ # $
% & % &
% &

d. Days of demand satisfied by each production run
250
13.42
18.63
= = days in demand
only mode
Time in production for each order
671
2.24
300
Q
p
= = = days in production for each
order. Total time 13.42 = days per cycle.
Thus, percent of time in production
2.24
16.7%
13.42
= = .

12.7 $2 unit year H = , $10 order S = ,
4, 000
4, 000 16
250
D d
! "
= = =
# $
% &
. So,
2 2 4, 000 10
200
2
DS
Q
H

= = = . ROP (reorder point) l d = , l (lead time = 5 days).
Thus, ROP 5 16 80 units = = .
Answer : Saveola, Inc. should place an order for 200 frames every time the inventory of
frames falls to 80 units. This will be their inventory policy.

12.8
( ) 2 5, 400 34
300
H
= ; Square both sides
367, 200
90, 000
H
= ,
367, 200
$4.08
90, 000
H = =

12.9 a.
( )( ) 2 6, 000 30
2
189.74 units
10
DS
EOQ
H
= = =
b. Average inventory = 94.87
c. Optimal number of orders/year = 31.62
d. Optimal days between orders
250
7.91
31.62
= =
e. Total annual inventory cost 601, 897.37 = (including the $600,000 cost of goods)

12.10 a. Holding cost = $530.33
b. Set up cost = $530.33
c. Unit costs = $56,250.00
d. Total costs = $57,310.66
e. Order quantity = 16,970.56 units
Thus, order 10,001 units for a total cost of $57,310.66.
A-39

12.11
Inventory
Item

$Value
per
Case

#Ordered
per
Week

Total $
Value/Week
(52 Weeks)
Total
($*Weeks)


Rank

Percent of
Inventory
Cumulative
Percent of
Inventory
Fish Fillets 143 10 $1,430.00 $74,360.00 1 17.54% 34.43%
French Fries 43 32 $1,376.00 $71,552.00 2 16.88% 47.31%
Chickens 75 14 $1,050.00 $54,600.00 3 12.88% 59.53%
Prime Rib 166 6 $996.00 $51,792.00 4 12.22% 69.83%
Lettuce (case) 35 24 $840.00 $43,680.00 5 10.31% 78.85%
Lobster Tail 245 3 $735.00 $38,220.00 6 9.02% 83.82%
Rib Eye Steak 135 3 $405.00 $21,060.00 7 4.97% 87.25%
Bacon 56 5 $280.00 $14,560.00 8 3.44% 90.64%
Pasta 23 12 $276.00 $14,352.00 9 3.39% 93.74%
Tomato Sauce 23 11 $253.00 $13,156.00 10 3.10% 95.71%
Table Cloths 32 5 $160.00 $8,320.00 11 1.96% 97.60%
Eggs (case) 22 7 $154.00 $8,008.00 12 1.89% 98.28%
Oil 28 2 $56.00 $2,912.00 13 0.69% 98.72%
Trash Can Liners 12 3 $36.00 $1,872.00 14 0.44% 99.13%
Garlic Powder 11 3 $33.00 $1,716.00 15 0.40% 99.42%
Napkins 12 2 $24.00 $1,248.00 16 0.29% 99.72%
Order Pads 12 2 $24.00 $1,248.00 17 0.29% 99.83%
Pepper 3 3 $9.00 $468.00 18 0.11% 99.93%
Sugar 4 2 $8.00 $416.00 19 0.10% 99.93%
Salt 3 2 $6.00 $312.00 20 0.07% 100.0%
$8,151.00 $423,852.00 100.00%

a. Fish filets total $74,360
b. C items are items 10 through 20 in the above list (although this can be one or two
items more or less)
c. Total annual $ volume = $423,852

12.12 Incremental Costs
Safety Stock Carrying Cost Stockout Cost Total Cost
0 0 70(100 0.4 + 200 0.2) = 5,600 5,600
100 100 15 = 1,500 (100 0.2) (70) = 1,400 2,900
200 200 15 = 3,000 0 3,000

The safety stock which minimizes total incremental cost is 100 kilos. The re-order point then
becomes 200 kilos + 100 kilos or, 300 kilos.

A-40
12.13 S $10 order = , 4 days LT = , 80 day d = , 20 = , H 10% = of $250,
( ) for term 80 100 8, 000 D = =
a.
2
800 calzones
DS
Q
H
= = . Order every days 10 days
Q
d
=
b. ROP for calzone, ( ) demand during lead time 40 LT = = , 1 Z = (from Table)
for 0.1587, ROP 360
dLT
d LT Z = + =
c. On hand = 85, days left = 1. Since ROP
dalt
d LT Z = + ,
ROP d LT
Z
LT

= .
Thus, Z of 0.25 gives 0.5987. So there is a 40.13% chance of stockout.
d. 400 average inventory
2
Q
= = , 10 orders term
D
Q
= .
( )( ) Holding cost term 400 0.25 $100
2
Q
H = = =
( )( ) Order cost term 10 10 $100
D
S
Q
= = =

12.14 $16 S = , $0.40 calzone term H = , 160 p = , 80 d = , 8, 000 D = for 100 days of the term
a.
( )
2
1,131.37
1
DS
Q
H d p
= =


b.
1,131.37
Cycle 14.14
80
Q
d
= = =
c. Run production for
1,131
days 7.07 days
160
Q
p
= =

A-41
12.15 Under present price of $6.40 per box:
Economic Order Quantity:
2 2 5000 25
395.3 or 395 boxes
0.25 6.40
DS
Q
H


= = =

where
D = annual demand, S = set-up or order cost, H = holding cost

Total cost order cost holding cost purchase cost
2
5, 000 25 395 0.25 6.40
6.4 5, 000 316.46 316.00 32, 000
395 2
$32, 632.46
DS QH
CD
Q
= + + = + +

= + + = + +
=

Note: Order and carrying costs are not exactly equal due to rounding of the EOQ to a whole
number. Under the quantity discount price of $6.00 per box:

Total cost order cost holding cost purchase cost
2
5, 000 25 5, 000 0.25 6.00
5, 000 6.00 41.67 3, 750.00 30, 000
3, 000 2
$33, 791.67
DS QH
Q
= + + = +

= + + = + +
=

Therefore, the old supplier with whom they would incur a total cost of $32,632.46, is
preferable.

12.16 Economic Order Quantity, non-instantaneous delivery:
where: D = period demand, S = set-up or order cost, H = holding cost,
d = daily demand rate, p = daily production rate

( )
( )
50
200
2 2 10, 000 200
2, 309.4
1.00 1
1
d
p
DS
Q
H


= = =

or 2,309 units


A-42

13
CHAPTER


Aggregate
Planning





13.1 The total production required over the year is 8,400 units, of 700 per month. Thus, the
schedule is to produce 700 per month and have no costs associated with work force
variation. The only costs incurred will be the monthly production cost, the inventory cost,
and the shortage cost. The costs are calculated as follows.


Month
Beginning
Inventory
Produc-
tion
Production
Cost

Demand
Ending
Inventory

Shortage
Inventory
Cost
Shortage
Cost
January 0 700 $49,000 500 200 0 $600 $0
February 200 700 49,000 600 300 0 900 0
March 300 700 49,000 600 400 0 1,200 0
April 400 700 49,000 700 400 0 1,200 0
May 400 700 49,000 700 400 0 1,200 0
June 400 700 49,000 800 300 0 900 0
July 300 700 49,000 900 100 0 300 0
August 100 700 49,000 900 0 100 0 1,000
September 0 700 49,000 800 0 200 0 2,000
October 0 700 49,000 700 0 200 0 2,000
November 0 700 49,000 600 0 100 0 1,000
December 0 700 49,000 600 0 0 $ 0 0
8,400 $588,000 8,400 2,100 600 $ 6,300 $6,000

The total cost of this plan is the sum of the three costs, or $600,300.

A-43
13.2 a. Total hotel demand for the year = 7,000,000
Total restaurant demand for the year = 2,080,000

Level staffing


Quarter
Hotel
(Room)
Demand

Personnel
Required

Restaurant
Demand


Req.


Total


Hire


Terminate
Winter 800,000 33 160,000 12 45 45
Spring 2,200,000 33 800,000 12 45
Summer 3,300,000 33 960,000 12 45
Fall 700,000 33 160,000 12 45
Totals 7,000,000 132 2,080,000 48 180 45

Personal cost = 180 quarters of labor 5,000 = $900,000
Hiring cost = 45 hires at $1,000 = 45,000
Termination cost = none = 0
$945,000
b. Total hotel demand for the year = 7,000,000
Total restaurant demand for the year = 2,080,000

Chase staffing (staffing to meet the forecasted demand)

Personnel Personnel Totals


Quarter
Hotel
(Room)
Demand


Req.


Hire

Termi-
nate

Restaurant
Demand


Req.


Hire

Termi-
nate

Quarter
Hires
Quarter
Termi-
nations
Winter 800,000 8 8 160,000 2 2 10
Spring 2,200,000 22 14 800,000 10 8 22
Summer 3,300,000 33 11 960,000 12 2 13
Fall 700,000 7 0 26 160,000 2 0 10 36
Totals 7,000,000 70 2,080,000 26 45 36

Personnel cost = 96 quarters of labor 5,000 = $480,000
Hiring cost = 45 hires @ $1,000 = 45,000
Termination cost = 36 terminations @ $2,000 = 72,000
$597,000
c. The chase plan developed in part b is most economical ($945,000 vs. $597,000)

A-44
13.3 Total hotel demand for the year = 7,000,000
Total restaurant demand for the year = 2,080,000

Hiring from local staffing agency all personnel above base requirements.



Quarter
Hotel
(Room)
Demand


Req.


Hire
Personnel
from
Agency

Restaurant
Demand


Req.


Hire
Personnel
from
Agency

Quarter
Hires
Quarter
from
Agency
Fall 800,000 8 7 1 160,000 2 2 0 2 1
Spring 2,200,000 22 0 15 800,000 10 0 8 0 23
Summer 3,300,000 33 0 26 960,000 12 0 10 0 36
Fall 700,000 7 0 0 160,000 2 0 0 0 0
Totals 7,000,000 28* 42 2,080,000 26 8** 18 35 60

*On Hotel Grand payroll (7 each quarter 4 quarters = 28)
** On Hotel Grand payroll (2 each quarter 4 quarters = 8)
Total on Grand Hotel payroll = 28+ 8 = 36

Personnel cost = 36 quarters of labor 5,000 = $180,000
Hiring cost = 9 ( ) 7 2 = + hires @ $1,000 = 9,000
Termination cost = 0 terminations @ $2,000 = 0
Staffing agency costs = 60 @ 6,500 = 390,000
$579,000

13.4 Plan A:
Month Demand Production Hire Fire Extra Cost
Mar 1,000 900 700 56,000
Apr 1,200 1,200 300 12,000
May 1,400 1,400 200 8,000
June 1,200 1,200 200 8,000
July 1,500 1,500 300 12,000
Aug 1,300 1,300 200 16,000
Total extra cost: $112,000

Plan B:
Month Demand Production Inventory Sub-Contracting Extra Cost
Mar 1,000 1,100 200 2,000
Apr 1,200 1,100 100 1,000
May 1,400 1,100 200 8,000
June 1,200 1,100 100 4,000
July 1,500 1,100 400 16,000
Aug 1,300 1,100 200 8,000
Total extra cost: $39,000

Therefore, Plan B would be preferred.

A-45
13.5 Plan Number 1:
Month Demand Production Inventory Sub-Contracting Extra Cost
1 1,000 1,200 300 3,000
2 1,200 1,200 300 3,000
3 1,400 1,200 100 1,000
4 1,200 1,200 100 1,000
5 1,500 1,200 200 8,000
6 1,300 1,200 100 4,000
Total extra cost: $112,000

Plan Number 2:
Month Demand Production Inventory Overtime Extra Cost
1 1,000 1,200 300 3,000
2 1,200 1,200 300 3,000
3 1,400 1,200 100 1,000
4 1,200 1,200 100 1,000
5 1,500 1,200 200 2,000
6 1,300 1,200 100 1,000
Total extra cost: $39,000

Therefore, Plan Number 2 would be preferred.

13.6 Plan Y:
Month Demand Production Hire Fire Extra Cost
1 1,100 1,100 400 32,000
2 1,600 1,600 500 20,000
3 2,200 2,200 600 24,000
4 2,100 2,100 100 8,000
5 1,800 1,800 300 24,000
6 1,900 1,900 100 4,000
Total extra cost: $112,000

Plan Z:
Month Demand Production Inventory Sub-Contracting Extra Cost
1 1,100 1,600 600 6,000
2 1,600 1,600 600 6,000
3 2,200 1,600
4 2,100 1,600 500 20,000
5 1,800 1,600 200 8,000
6 1,900 1,600 300 12,000
Total extra cost: $52,000
Therefore, Plan Z would be preferred.

A-46

14
CHAPTER


Materials Requirements
Planning (MRP) & ERP





14.1 Requirement for 3,500 Get Well bud vases.
3,500 Vases
3,500 8" white ribbons (2,333 ft.)
3,500 8" red ribbons (2,333 ft.)
3,500 signature cards
7,000 sprigs of babys breath
7,000 pink roses

14.2
Period (week)

Lot
Size
Lead
Time
On
Hand
Safety
Stock
Allo-
cated
Low-
Level
Code
Item
ID
CD Case
1 2 3 4 5 6 7 8

Gross Requirements 650 300 550 400 500
Scheduled Receipts
Projected On Hand 1,000 1,000 1,000 1,000 350 50
Net Requirements 500 400 500
Planned Order Receipts 500 400 500


Lot
for
Lot

1

1,000





0
CD
Case
Planned Order Releases 500 400 500

Gross Requirements 500 400 500
Scheduled Receipts
Projected On Hand
Net Requirements 500 400 500
Planned Order Receipts 500 400 500


Lot
for
Lot

1







1
CD
Top
Planned Order Releases 500 400 500

Gross Requirements 500 400 500
Scheduled Receipts
Projected On Hand
Net Requirements 500 400 500
Planned Order Receipts 500 400 500


Lot
for
Lot

1







1
CD
Bottom
Planned Order Releases 500 400 500

Gross Requirements 500 400 500
Scheduled Receipts
Projected On Hand
Net Requirements 500 400 500
Planned Order Receipts 500 400 500


Lot
for
Lot

1







1
CD
Insert
Planned Order Releases 500 400 500

Gross Requirements 500 400 500
Scheduled Receipts
Projected On Hand 100 100 100 100
Net Requirements 500 400 500
Planned Order Receipts 500 500 500


Lot
for
Lot

2







2

Black
Dye
Planned Order Releases 500 500 500
A-47

14.3
Period (day)

Lot
Size
Lead
Time
On
Hand
Safety
Stock
Allo-
cated
Low-
Level
Code
Item
ID
Ball Point Pens
1 2 3 4 5 6 7 8

Gross Requirements 10,000
Scheduled Receipts
Projected On Hand
Net Requirements 10,000
Planned Order Receipts 10,000


Lot
for
Lot

1







0

Planned Order Releases 10,000 10,000

Gross Requirements 10,000
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts 10,000


Lot
for
Lot

1







1
Cap
Planned Order Releases 10,000

Gross Requirements 2,000
Scheduled Receipts
Projected On Hand
Net Requirements 2,000
Planned Order Receipts 2,000


Lot
for
Lot

3







1
Ink CC
Planned Order Releases 2,000

Gross Requirements 10,000
Scheduled Receipts
Projected On Hand
Net Requirements 10,000
Planned Order Receipts 10,000


Lot
for
Lot

1








Body
Planned Order Releases 10,000

Gross Requirements 5,000
Scheduled Receipts
Projected On Hand
Net Requirements 5,000
Planned Order Receipts 5,000


Lot
for
Lot

1








Clip
Fine
Pt
Planned Order Releases 5,000

Gross Requirements 5,000
Scheduled Receipts
Projected On Hand 3,000 3,000
Net Requirements 2,000
Planned Order Receipts 2,000


Lot
for
Lot

1

3,000






Std.
Clip
Planned Order Releases 2,000

Gross Requirements 5,000
Scheduled Receipts
Projected On Hand 3,000 3,000
Net Requirements 2,000
Planned Order Receipts 2,000


Lot
for
Lot

1

3,000






Std.
Ball
Point
Planned Order Releases 2,000

Gross Requirements 5,000
Scheduled Receipts
Projected On Hand
Net Requirements 5,000
Planned Order Receipts 5,000


Lot
for
Lot

1








Fine
Point
Ball
Point
Planned Order Releases 5,000





A-48
14.4
Period (week, day)

Lot
Size
Lead
Time
On
Hand
Safety
Stock
Allo-
cated
Low-
Level
Code
Item
ID
Ball Point Pens
1 2 3 4 5 6 7 8

Gross Requirements 640 640 128 128
Scheduled Receipts
Projected On Hand
Net Requirements 640 640 128 128
Planned Order Receipts 640 640 128 128


Lot
for
Lot

1







0
Coffee
Table
Planned Order Releases 640 640 128 128

Gross Requirements 640 640 128 128
Scheduled Receipts
Projected On Hand
Net Requirements 640 640 128 128
Planned Order Receipts 640 640 128 128


Lot
for
Lot

1







1
Top
Planned Order Releases 640 640 128 128

Gross Requirements 80 80 16 16
Scheduled Receipts
Projected On Hand
Net Requirements 80 80 16 16
Planned Order Receipts 80 80 16 16


Lot
for
Lot

1







1
Stain
gal
Planned Order Releases 80 80 16 16

Gross Requirements 40 40 8 8
Scheduled Receipts
Projected On Hand 100 100 100 100 100 60 20 12 4
Net Requirements
Planned Order Receipts


Lot
for
Lot

1







1
Glue
gal
Planned Order Releases

Gross Requirements 640 640 128 128
Scheduled Receipts
Projected On Hand
Net Requirements 640 640 128 128
Planned Order Receipts 640 640 128 128


Lot
for
Lot

1







1
Base
Planned Order Releases 640 640 128 128

Gross Requirements 1,280
Scheduled Receipts
Projected On Hand
Net Requirements 1,280
Planned Order Receipts 1,280


Lot
for
Lot

1







2
Long
Braces
Planned Order Releases 1,280

Gross Requirements 1,280
Scheduled Receipts
Projected On Hand
Net Requirements 1,280
Planned Order Receipts 1,280


Lot
for
Lot

1







2
Short
Braces
Planned Order Releases 1,280

Gross Requirements 5,120
Scheduled Receipts
Projected On Hand
Net Requirements 5,120
Planned Order Receipts 5,120


Lot
for
Lot

1







2
Leg
Planned Order Releases 5,120

Gross Requirements 5,120
Scheduled Receipts
Projected On Hand 880 880 880 880 880 880
Net Requirements 5,120
Planned Order Receipts 6,000


Lot
for
Lot

1







3
Brass
Caps
Planned Order Releases 6,000
A-49

14.5 Coffee Table Hours Lead
Master Schedule Required Time Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8
640 640 128 128
Table Assembly 2 1 1,280 1,280 256 256
Top Preparation 2 1 1,280 1,280 256 256
Assemble Base 1 1 640 640 128 128
Long Braces (2) 0.25 1 320 320 64 64
Short Braces (2) 0.25 1 320 320 64 64
Legs (4) 0.25 1 640 640 128 128
Total Hours 0 1280 3,200 3,456 1,920 640 256
Employees needed @ 8 hrs. each 0 160 400 432 240 80 32


14.6 The following table lists the components used in assembling FG-A. Also included for each
component are the following information: the on-hand supply, lead time, and direct
components.

Item On-Hand LT (weeks) Components
PG-A 0 1 SA-B, SA-C(2), SA-D(2)
SA-B 0 1 SA-D(2)
SA-C 0 2 E, F(2)
SA-D 0 2 E (3)
E 10 1
F 5 3

While not required as part of the question, we recommend you make a product structure
tree to help you answer the questions on the Bill-of-Materials and lead time.


1 FGA [LT =1]
[LT =1]
SA-B
[LT =2]
SA-D(2)
E(3) [LT = 1]
[LT =2]
SA-C(2)
E [LT = 1] F(2) [LT = 3]
[LT =2]
SA-D(2)
E(3) [LT = 1]


a. Bill-of-Material associated with 1 unit of FG-A
1 SA-B Note: this is just the master recipe. Not subtracting off on on-hand
quantities YET
2 SA-C
4 SA-D 2 1 2 = +
14 E 2 3 2 1 2 3 6 2 6 = + + = + +
4 F 2 2 =
A-50
b. Total lead time (in weeks) associated with making an item of FG-A, assuming we
had no starting on-hand for any part? 6 weeks

Look at all branches of the product structure tree (or an assembly time chart, if we
had one). The most common mistake people tend to make is to forget the LT
associated with final assembly.

Longest branch is 6 weeks 1wk FGA 2wks SA-C 3wks F = + +
c. Yes, if we wanted to make one FG-A, we need to order more of either E or F.
We have enough F on-hand, but need 4 more E.

Now we look at the on-hand quantities and see we have 10 E and 5 F. Compare that
to the BOM calculated above. No subassemblies like SA-B, SA-C or SA-D, so we
are going to need all the component parts. Our on-hand records show we have 14 E
and 4 F, so we are short 4 E.

14.7 a. 17 2 (level 2) = 34
b. [17 3 (Bs)] 15 = 51 15 = 36
36 5 (Ds) = 180

14.8 a. 17 2 (level 2) + 17 2 3 (level 3) = 136
b. 170 12 2 (level 2 on hand) = 170 24 = 146

A-51

15
CHAPTER


Short-Term
Scheduling





15.1 A dummy task is added to balance the problem.
The assignment is
MayTask 1
GrayTask 2
RayTask 3
Total time = 1 + 1 + 1 = 3 hours

15.2 Convert the minutes into $,

Marketing Finance Operations Human Resources

Chris $80 $120 $125 $140

Steve $20 $115 $145 $160

Juana $40 $100 $35 $45

Rebecca $65 $35 $25 $75

(Now subtract smallest number in each column from every number.)
The Minimum Cost Solution =


Chris Finance $120
Steve Marketing $ 20
Juana Human Resources $ 45
Rebecca Operation $ 25
$210


15.3 The best pairs are assigned as follows:
AjayJackie
JackBarbara
GrayStella
RaulDana
Total compatibility score (overall) = 90 + 70 + 50 + 20 = 230

A-52
15.4
10 20 30 40
F
D
C
B
E
A
Hour
6
10
20
37
Gantt Chart
13
28


Project Time Due Date Late Days
A 9 22 15
B 7 17 3
C 3 16 0
D 4 13 0
E 8 16 12
F 6 9 0

a.
6 10 13 20 28 37 114
Average flow time 19 days
6 6
+ + + + +
= = =
b.
total late days 15 3 12
Average lateness 5 days
number of jobs 6
+ +
= = =
c. Maximum lateness 15 days = (for job AGantt Table)

15.5 a. The shortest processing time ( ) SPT =DBACE

D B A C E
Flow Time 0 1 3 6 11 20 = 41
Due Hours 0 12 4 8 6 7
Late Hours 0 5 13 = 18

Average flow time
41
8.2 hours
5
= =
Number of deliveries late C and E 2 = =
Average hours late
5 13 18
9 hours
2 2
+
= = =
A-53
b. The EDD schedule = BCEAD

B C E A D
Flow Time 0 2 7 16 19 20
Due Hours 0 4 6 7 8 12
Late Hours 0 1 9 11 8

Average flow time
64
12.8 hours
5
= =
Number of deliveries late C, E, A, and D 4 = =
Average hours late
29
7.25 days
4
= =

15.6 5
Cut & sew
Deliver
10 15 20 25
5 10 15 20 25
1
1
2
2
3
3
17 11 4
6 18 23
[123 schedule]
5
Cut & sew
Deliver
10 15 20 25
5 10 15 20 25
3 2 1
17 13 6
6 11 22
[321 schedule]


Answer : The 321 schedule finishes in 22 days, 1 day faster than the 123 schedule, which
finishes in 23 days.

15.7 a. We begin by taking 5 empty slots
b. Next, we find the shortest time in the table. It is product 2678 on Machine B. Since
this is on the second machine, this product can be done as late as possible.
2678
c. Then we find the shortest again. It is 2800 on B 2800 2678
d. Then it is 2731 on A. Since it is on the first machine, it is the earliest job.
2731 2800 2678
A-54
e. Finally, we get 2731 2134 2387 2800 2678


5
A
12 19 22
B
2731 2134 2387 2800 2678
7 14 21 25
2731 2134
33 35
2800 2678 2387


Total time 33 hours =

15.8 a. The jobs should be processed in the sequence: 3, 6, 2, 7, 5, 1, 4
b. Time = 61 hours

15.9 a. Jobs should be processed in the sequence A, B, C, D, E if scheduled by the FCFS
scheduling rule.
b. Jobs should be processed in the sequence A, B, C, D, E if scheduled by the EDD
scheduling rule.
c. Jobs should be scheduled in the sequence B, E, A, C, D if scheduled by the SPT
scheduling rule.
d. Jobs should be processed in the sequence D, C, A, B, E if scheduled by the LPT
scheduling rule.

15.10 Job Due Date Duration (Days) Critical Ratio
103 214 10 1.4
205 223 7 3.3
309 217 11 1.5
410 219 5 3.8
517 217 15 1.1

Jobs should be scheduled in the sequence 517, 103, 309, 205, 412 if scheduled by the
critical ratio scheduling rule.

A-55

16
CHAPTER


Just-In-Time and Lean
Production Systems





16.1 a.
( )
2
1
d
p
D S
Q
H

=



( )
2
2
1
d
p
D S
Q
H

=



( )( ) ( ) ( )( ) ( )( )( )
2 2
400
500
1
1, 000 10 1 1, 000, 000 10 .2
2, 000, 000
$10
2 2 100, 000 200, 000 200, 000
d
p
Q H
S
D


= = = = =


b.
10 1
hr 10 min
60 6
! !
Note that the lead time was not needed in this problem.

16.2 10 min. 2 min. = 8 min. improvement required

16.3 How to improve setups (from Figure 16.4 in Heizer/Render text).
Step 1: Separate setup into preparation and actual setup, doing as much as possible
while the machine/process is operating.
Step 2:

Move material closer and improve material handling
Step 3: Standardize and improve tooling
Step 4: Use one-touch system to eliminate adjustments
Step 5: Train operators and standardize work procedures

16.4
( )
( )
( )
5,000
10,000
2 1, 250, 000 15
2 37, 500, 000
3, 750, 000 1, 936 units
10 20 1 1
d
p
D S
Q
H


= = = = =



1, 936
per container 19.36 containers
100
=
A-56

16.5 Note: 6 S = minutes (or
1
10
hour) $100 shop labor cost .1 $100 $10 = =
( )
( )( )( )
( )
( )
50
500
2 12, 500 10
2 250, 000
5, 555 74
50 1 45 1
1
EOQ Safety stock Lead time 74 10 500
2
334 oil pumps
d
p
D S
Q
H

= = = = =

" #
= + + = + +
$ %
& '
=

334
No. of Kanban containers 9.27 9 or 10 containers required
36
= = =

16.6 Where: D = annual demand, S = set-up or order cost, H = holding cost,
d = daily demand rate, p = daily production rate. Solving for S (set-up cost):


( ) ( ) ( )
2 2
150
1,000
1 150 10 1
22, 500 10 1 0.15
2 2 40, 000 80, 000
191, 250
$2.39
80, 000
$2.39 set-up 60 minute hour
Set-up time 2.69 minute set-up
$50 hour
d
p
Q H
S
D


= = =

= =

= =



A-57

17
CHAPTER


Maintenance and
Reliability





17.1 Failure Rate Analysis
Station No. 1: N = 1,000
F = 22

22
0.022
1, 000
1 0.022 0.978 97.8%
FR
R
= =
= = =


Station No. 2: N = 1,000
F = 51

51
0.051
1, 000
1 0.051 0.949 94.5%
FR
R
= =
= = =

Answer : Unit #1 is clearly better, with a lower failure rate and better reliability.

17.2 Reliability ( )
1 2 3 s n
R R R R R = ! . So, ( )( )( )
5
0.98 0.99 0.96 0.9304 R = =
Answer : The reliability is 93.04%
A-58

17.3 Task Errors FR Reliability
1 1 0.001 0.999
2 6 0.006 0.994
3 4 0.004 0.996
4 2 0.002 0.998
5 3 0.003 0.997
6 1 0.001 0.999
7 0 0.000 1.000
8 2 0.002 0.998
9 1 0.001 0.999
10 2 0.002 0.998
11 1 0.001 0.999
12 1 0.001 0.999
13 0 0.000 1.000
14 2 0.002 0.998
15 3 0.003 0.997
Total 29

Overall Reliability ( ) Product of all reliabilities above 0.971 97.1%
s
R = = =

17.4 Reliability (stick) ( )
2
1 1 0.99 0.9999 = =
Reliability (cloth) ( )
2
1 1 0.98 0.999998 = =
The reliability of the snake-charmers work 0.9999 0.999998 0.9998 99.98% = = =

17.5
.96
.96
.96
.99
.99
.93
.93
.93
.90
.90
.90
.90


Mountain tests reliability ( )
3
1 1 0.96 0.999936 = =
Bump tests reliability ( )
2
1 1 0.99 0.999900 = =
Speed tests reliability ( )
3
1 1 0.93 0.999657 = =
Sudden brake tests reliability ( )
4
1 1 0.90 0.999900 = =
So, overall reliability ( ) 0.999936 0.999900 0.999657 0.999900 0.9994 99.94%
s
R = = =

A-59

A
MODULE


Decision Making
Tools





A.1
$20,000 $30,000 $26,500
Assembly
Line
$10,000 $50,000 $29,000
Plant
Addition
$0 $0 $0
No New
Product
0.35
Competes
0.65
Doesnt Compete
Expected
Value
Prob.
States of Nature
Decision
Alternatives


Answer : ( ) ( ) 0.35 $20, 000 0.65 $50, 000 $29, 000 $10, 500 + =

A.2
0 2,000 3,000 N
4,000 8,000 9,000 M
10,000 6,000 20,000 L
Fixed
Slight
Increase
Major
Increase
States of Nature
Decision
Alternatives
Minimum
0
4,000
10,000
50,000 4,000 40,000 O 50,000

Use maximin: criterion. No floor space (N).

A.3 Row Average
Increasing capacity $700,000
Using overtime $700,000
Buying equipment $733,333


Using equally likely, Buying equipment is the best option.
A-60


A.4 ( ) ( ) ( ) ( )
3 2 35 15
Expected value under certainty 50 20 100 100
10 10 100 100
15 4 35 15 69
= + + +
= + + + =


A.5 ( ) ( ) ( ) ( ) E A 0.4 40 0.2 100 0.4 60 60 = + + =
( ) ( ) ( ) ( ) E B 0.4 85 0.2 60 0.4 70 74 = + + =
( ) ( ) ( ) ( ) E C 0.4 60 0.2 70 0.4 70 66 = + + =
( ) ( ) ( ) ( ) E D 0.4 65 0.2 75 0.4 70 69 = + + =
( ) ( ) ( ) ( ) E E 0.4 70 0.2 65 0.4 80 73 = + + =
Choose Alternative B.

A.6 ( ) ( ) ( ) ( )
1 1 3 1
Expected value under certainty 50 92 40 64 10 23 12 16 61
5 4 10 4
= + + + = + + + =

A.7 Solution Approach: Decision tree, since problem is under risk and has more than one
decision.


Wait 1 day
Buy now $70,000
Buy now $55,000
$0
Avail. (.30)
21 Wait 1 day
Unavailable
(.70)
55
$0
Avail. (.60)
33
33
Buy now $30,000
Wait 1 day
Unavailable
(.40)
70
$0


(Numbers in Nodes are in $1,000s)

Answer : Maximum expected profit: $33,000. Manny should wait 1 day. Then, if an XPO2
is available, he should buy it. Otherwise, he should stop pursuing an XPO2 on the
wholesale market.

A-61
A.8 We use a decision table, since expected marginal value of perfect information is asked for.

Profits (= Payoffs)
D1: Good Market: 80(400) 25,000 = $7,000
Bad Market: 70(375) 25,000 = $1,250
D2: Good Market: 85(450) 30,000 = $8,250
Bad Market: 80(425) 30,000 = $4,000
D3: Good Market: 90(475) 33,000 = $9,750
Bad Market: 80(425) 33,000 = $1,000

Decision Alternatives : D1, D2, D3, N (N = Do Nothing)
States of Nature : Good Market, Bad Market
Decision Table and Solution


7,000 1,250 D1
8,250 4,000 D2
9,750 1,000 D3
Good Market
(0.6)
Bad Market
(0.4)
States of Nature
Decision
Alternatives
EV
4,700
6,550
6,250
0 0 N 0


The car enthusiast should use design D2.
Exp. value under certainty:
( )( ) ( )( ) 0.6 9, 750 0.4 4, 000 + = $7,450
Minus Max Expected Value: $6,550
Expected (Marginal) Value $900

A-62
A.9 More than one decision is involved, and problem is under risk, so use a decision tree
approach.


20
Modest (0.3)
response
160
160
220
Sizable (0.7)
response
Advertise
40 Dont Advertise
544
800
Low (0.4)
demand
High (0.6)
demand
544
Large
Facility
270
242
223
270
Dont expand
Expand
Low (0.4)
demand
High (0.6)
demand
Small
Facility
200


Note: Payoffs and expected payoffs are in $1000s.
a. Build the large facility. If demand proves to be low, then advertise to stimulate
demand. If demand proves to be high, no advertising option is available (so dont
advertise).
b. Expected Payoff: $544,000.

A.10 Approach: Set up and solve via a decision table.
Cost per dozen bagels: Labor:
$16.50 hr
$1.65 dozen
10 dozen hr
=
Ingredients:
$0.85 hr
$2.50 dozen
+


$3.00 if sold during the day
Profit per dozen bagels
$1.00 if not

(
)
=
*

)
+


$3.00 $5.50 $2.50
$1.00 $1.50 $2.50

=
=

Suppose: B = dozens baked in A.M.
D = dozens sold during the day (= dozens demanded)
Then,
( ) $3 $1 if
total profit
$3 if
D B D B D
B B D
(
=
*

+

Also, since demand is between 4043 dozen bagels, inclusive, always more profitable to
bake 40 dozen than fewer than 40 dozen, AND always more profitable to bake 43 dozen
than more than 43 dozen. From work above, decision table, expected values, and answer
are as follows.
A-63

120 120 40
119 123 41
118 122 42
40
(0.20)
41
(0.30)
(= States of Nature)
Dozens
Baked B
EV
120
122.2
123.2
117 121 43 122.8
Dozens Demanded D
120 120
123 123
126 126
42
(0.35)
43
(0.15)
125 129
= Decision
Alternatives


Answer : 42 dozen bagels

A.11 a.
8 (6 + 2) = 0
Ad?
5 (6 + 2) = 3
P(success) = 0.5
Prob (not success) = 0.5
advertise
5 6 = 1
Advertise
Dont
EMV = 0.5(0) + 0.5(3) = 1.5
10 6 = 4
Rev Cost
Payoff
EMV = 0.6(0.4) + 0.4(1) = 2
P(high) = 0.6
P(low) = 0.4 Build?
$0
Dont Build
Build
2


b. Build studio, but dont advertise (even if demand is low)
c. Expected value = $2 million

A.12 a.
0
10 6 = 4
P(high) = 0.6
P(low) = 0.4
Demand
Dont Build
Build
Build
Build?
Ad?
Build
EMV = 0.6(4) +
0.4(0) = 2.4
0
We dont really care
about this part of the tree
(which has a 1 EMV anyways)
Dont Build

b. EVPI = EV with PI EMV = 24 2 = 0.4 = $400,000


A-64

B
MODULE


Linear
Programming





B.1 a. Let T = number of trucks to produce per day
Let C = number of cars to produce per day
max z = 300T + 220C
S.T.
1 1
1
40 60
T C +

1 1
1
50 50
T C +
, 0 T C
b. Graph feasible region:


10
20
30
40
50
60
10 20 30 40 50 60
T
C
70 80 90
A
B
C
(1)
(2)
O


c.
( )
( )
( )
( ) ( )
( )
Point Coordinates value
O 0, 0 0
A 0, 50 11, 000
C 40, 0 12, 000
B Solve 2 equations in 2 unknowns 12, 600
derived from 1 and 2
to obtain 20, 30
z



d. Produce 20 trucks and 30 cars daily for a profit of $12,600 per day.

A-65
B.2 We solve this problem by the isocost line method:


2
4
6
8
10
12
2 4 6 8 10 12
x
14 16 18
(6, 6)
1
x
2
14
16
18
(0, 4)
z = 12
z = 4 z = 11
2


Answer : Unique optimal solution is (0, 4) with z = 4

B.3 Feasible region is a line segment AB, where A = (0,0), B = (3, 5). Solution via isoprofit line
method is shown.


2
4
6
8
2 4 6
x
(1)
1
x
2
8
6
4
z = 20
2
z = 0
z = 5
(2)
(3)
A
B
(4)
(5)


Answer : Unique optimal solution is ( ) ( )
1 2
, 3, 5 x x = , with objective function value 20.

A-66
B.4 Using the isoprofit line method.


1
2
3
4
5
6
1 2 3 4 5 6 7 8 9
Opt. sol.
7
8
9
(2)
1
2
3
4
(5)
(6)
(4)
(3)
(1)
z = 9
z = 4
= 6 z
A
B


Answer : Unique optimal solution is ( ) ( ) , 1, 5 A B = . It has objective function 9.0.

B.5 Feasible region is same as in Problem B.4. Use Isoprofit line method.


1
2
3
4
5
6
1 2 3 4 5 6 7 8 9
7
8
9
1
2
3
4
z = 1
A
z = 4
B


Answer : Problem is feasible and unbounded.

A-67
B.6 Let S = number of standard bags to produce per week
Let D = number of deluxe bags to produce per week


( )
( )
maximum: 10 8
1
300
2
2
360
3
, 0
z S D
S D A
S D B
S D
= +
+
+




100
200
300
100 200 300 400 500 600
400
S
D
(A)
(B)
(0, 540)
(240, 180)
(360, 0)
z = $3,840
z = 2,000
z = 1,000


Extreme (Corner) Points
Point Profit
(0, 0) $0
(0, 300) $2,400
(360, 0) $3,600
(240, 180) $3,840 optimal solution and answer


A-68

B.7
1
2
3
1 2 3 4 5 6
4
x
y
(2, 4)
1 2
(2, 3)
(2)
(3)
(4)
(1)
(4, 1)
(1, 3 1/2)
(5)
5



( )
( )
( )
( )
( )
4 line 1
2 line 2
2 6 line 3
2 8 line 4
0 line 5
x
x
x y
x y
y


+
+



There are 5 corner (extreme) points.

B.8
Foods
Cost/
Serving
Calories/
Serving
Percent
Protein
Percent
Carbs
Percent
Fat
Fruit/
Vegetable
Apple Sauce $0.30 100 0% 100% 0% 1
Canned Corn $0.40 150 20% 80% 0% 1
Fried Chicken $0.90 250 55% 5% 40% 0
French Fries $0.20 400 5% 35% 60% 0
Mac & Cheese $0.50 430 20% 30% 50% 0
Turkey Breast $1.50 300 67% 0% 33% 0
Garden Salad $0.90 100 15% 40% 45% 1

AS CC FC FF MC TB GS
Cost 0.3 0.4 0.9 0.2 0.5 1.5 0.9
Servings 0 1.333333 0.457143 0 1.129568 0 0 $1.51

Constraints AS CC FC FF MC TB GS LHS RHS
Cals min 100 150 250 400 430 300 100 800 500
Cals max 100 150 250 400 430 300 100 800 800
Protein min 0 30 137.5 20 86 201 15 200 200
Carb min 100 120 12.5 140 129 0 40 311.4286 200
Fat max 0 0 100 240 215 99 45 288.5714 400
Fruit/Veg Min 100 150 0 0 0 0 100 200 200
A-69

Target Cell (Min) Answer Report (Relevant Section)
Cell Name Original Value Final Value
$I$14 servings $2.91 $1.51
Adjustable Cells
Cell Name Original Value Final Value
$B$14 serving A 1.50 0.00
$C$14 serving C 0.00 1.33
$D$14 serving FC 1.33 0.46
$E$14 serving FF 0.00 0.00
$F$14 serving M 0.00 1.13
$G$14 serving T 0.00 0.00
$H$14 serving G 1.40 0.00
Constraints
Cell Name Cell Value Formula Status Slack
$I$17 Cals min LI 800 $I$17 $J$1 Not Binding 300
$I$18 Cals max L 800 $I$18 $J$1 Binding 0
$I$19 Protein min 200 $I$19 $J$1 Binding 0
$I$20 Carb min L 311.4286 $I$20 $J$2 Not Binding 111.4286
$I$21 Fat max LI 288.5714 $I$21 $J$2 Not Binding 111.4286
$I$22 Fruit + Veg I 200 $I$22 $J$2 Binding 0

Adjustable Cells Sensitivity Report (Relevant Section)

Cell

Name
Final
Value
Reduced
Cost
Objective
Coefficient
Allowable
Increase
Allowable
Decrease
$B$14 serving A 0 0.172602 0.3 1E + 30 0.172602
$C$14 serving C 1.333333 0 0.4 0.258904 0.225581
$D$14 serving FC 0.457143 0 0.9 0.105072 0.100581
$E$14 serving FF 0 0.152691 0.2 1E + 30 0.152891
$F$14 serving M 1.129568 0 0.5 0.062909 0.707833
$G$14 serving T 0 0.169316 1.5 1E + 30 0.169318
$H$14 serving G 0 0.666151 0.9 1E + 30 0.688151
Constraints

Cell

Name
Final
Value
Shadow
Price
Constraint
R.H. Side
Allowable
Increase
Allowable
Decrease
$I$17 Cals min LI 800 0 500 300 1E + 30
$I$18 Cals max L 800 0.00023 800 200 251.6129
$I$19 Protein min 200 0.008983 200 155 40
$I$20 Carb min L 311.4286 0 200 111.4285 1E + 30
$I$21 Fat max LI 288.5714 0 400 1E + 30 111.4286
$I$22 Fruit + Veg I 200 0.001504 200 485.7143 200


A-70

C
MODULE


Transportation
Modeling





C.1
10
5
9
3
8 7
1 2 3 4 Supply
Destination
A
Source
4
6
3
1
2 1
B
Demand
5
5 4 6 5
3 X
X
X X
8 5 0
12 7 1 X


Answer :
a. Final Solution: Shown in the final tableau above.
b. ( ) ( ) ( ) ( ) ( ) Total Cost : 5 10 3 9 1 3 6 2 5 1 $97 + + + + =
c. Perform optimality test:
Result :


Cell
A-3
A-4
A-1
if Opened Up
0
0
0
Change in Cost
Since these numbers
are all nonnegative,
the solution is optimal.


Answer : Yes

A-71
C.2 First, apply the optimality test:


Cell
Change in Cost if Route
is Opened Up
C-MI +3
C-J +4
H-L +2
B-MI 1
B-D +4

Resulting new basic feasible solution:


7
45
2
55
4 5
Miami Denver Lincoln
San
Supply
Destination
CHI.
Source
3 1
35
5 2
HOU.
Demand
40
Jose
6 9
50
7 4
BUF. 30
70 90 45 50
100
75
80


TOTAL COST: ( ) ( ) ( ) ( ) ( ) ( ) 30 6 40 3 35 1 55 2 45 4 50 4 $825 Answer + + + + + = =

A-72
C.3 Total supply = 450 < 500 = Total demand.


6
75
4
200
9
A B C Supply
Destination
W
Source
10 5
100
8
X
Demand
0
12 7 6
Y 75
250 100 150
200
175
75
0 0 0
Z 50 50 Dummy =


Optimal solution and meaning :
Ship 200 tons of grain from W to A
Ship 100 tons of grain from X to B
Ship 75 tons of grain from X to C
Ship 75 tons of grain from Y to C.

Results in demands being met at destinations B and C, but in a shortfall of 50 tons at
destination A. Total cost of optimal shipping plan: $2,750.

C.4
4
1
8
21
6
A B C
1
5 2
2
1
2
7 9 3
3 25
9 8 9
4
17
9
D
4
3
2
1
13 1


Cost $84 16 34 9 75 9 26 $253 = + + + + + + = . This is also optimal.

A-73
C.5
12
8
8
4
5 10
A B C
Destination
1
Source:
6 11
12
3 7
2 2
D
4
9
E
4 2


Cost $48 64 40 8 12 36 $208 = + + + + + =

C.6 The only cell with a negative cost improvement index is HoustonMiami. It achieves a
1. Allocate 10 to that cell. The result is:

Denver Yuma Miami
Houston 0 0 10
St. Louis 20 0 0
Chicago 0 20 10

Total cost = $170

C.7 2
4
4 5 9
6 7
1
8 10
1
1
4
3
3
11 12
3


Cost $3 1 4 3 4 5 1 8 1 10 3 12 $89 = + + + + + =

A-74

C.8 Cell Improvement Index
B-2 9
C-1 +6

Result:

2 8
6
1 2
Destinations
A
Sources:
9 6
3 B 1
7 7
C
6
4
2 2
5 7


Cost $12 9 18 14 $53 = + + + =




A-75

D
MODULE


Waiting Line
Models





D.1 CURRENT MACHINE: 40 = , 60 =
1. Utilization ( )
40
67%
60
= =
2. Average number of customers waiting
( )
( )
( )
2
40
1
1
60 60 40 3
q
L = =

customers
3. Average number of customers in system ( )
40
2
60 40
s
L = =

customers
4. Average time waiting
( )
( )
40
0.033 hours 2 minutes
60 60 40
q
W = = =


5. Average time in system ( )
1 1
hours 3 minutes
60 40 20
s
W = = =



PROPOSED MACHINE: 40 = , 90 =
1. Utilization ( )
40
44%
90
= =
2. Average number of customers waiting
( )
( )
( )
2
40
0.356
90 90 40
q
L = =

customers
3. Average number of customers in system ( )
40
0.8
90 40
s
L = =

customers
4. Average time waiting
( )
( )
40
0.0089 hours 0.533 minutes
90 90 40
q
W = = =


5. Average time in system ( )
1 1
hours 1.2 minutes
90 40 50
s
W = = =


Answer : Thus, we observe that the proposed machine will give better results with a
decrease in queries as well as time in system.

A-76
D.2 Two machine system
a.
40 1
2 60 3 M

= = =

. Each machine is busy, on average, 33 percent of the time.


b.
q
L = average number of customers waiting in line = 0.081
c. 0.081 0.667 0.748
s q
L L

= + = + = customers in the system




d.
0.081
0.002 hours 0.1215 minutes
40
7.3 seconds average waiting time in the queue
q
q
L
W

= = = =
=



e.
1 1
0.002 0.0187 hours 1.12 minutes
60
67.3 seconds average time in the system
s q
W W

= + = + = =
=

The 2-machine system seems to be the best overall, with even further reduction in
queues and waiting times.

D.3 This model is, again, the M/M/1 model. The service time of 30 seconds means that the
service rate, , is 120 per hour.
a.
40 1
120 3

= = = . In this example and in Problem D.2, the system utilization is the


same.
b.
( ) ( )
2 2
40 1
0.167
120 120 40 6
q
L


= = = =

customers. The average number of
customers waiting in line is twice as large as the average number (0.081) found in
Problem D.2.
c.
40 1
120 40 2
s
L


= = =

customer. On the average, the number of customers in
the system is
1
2
, rather than the
3
4
(0.748) found in Problem D.2.
d.
( ) ( )
40 1 1
hour minutes 15 seconds
120 120 40 240 4
q
W


= = = = =

, which
exceeds
q
W in Problem D.2.
e.
1 1 1 3
hour minutes 45 seconds
120 40 80 4
s
W

= = = = =

. Thus, average time
spent in the system is 15 seconds waiting plus 30 seconds service. The 45 seconds
calculated here is less than the 67.3 seconds found in Problem D.2.

A-77
D.4 EMPLOYEE SYSTEM: The current system is actually an M/D/1 system, because service
times are constant.
a.
10
0.83
12

= = = . The toll collector is busy 83 percent of the time.


b.
( ) ( )( )
2
100 100
2.08
2 2 12 12 10 48
q
L


= = = =

drivers. The average number of
drivers waiting to pay the toll is 2.08.
c. 2.08 0.83 2.91
s q
L L

= + = + = drivers. The average number of drivers at any one


toll booth is 2.91.
d.
( ) ( ) ( )
10 10
0.208 minutes 12.5 seconds
2 2 12 12 10 48
q
W


= = = = =

. The
average time drivers spend waiting is 12.5 seconds.
e. waiting time service time 12.5 seconds 5 seconds 17.5 seconds
s
W = + = + =

AUTOMATED SYSTEM: The proposed system, although automated, is an M/M/1 system.
a.
10
0.83
12

= = = . The utilization of the new system is the same as that of the old
system.
b.
( ) ( )
2
100 100
4.16
12 12 10 24
q
L


= = = =

drivers. Twice as many drivers are in
line under the new, automated system.
c. 5
s q
L L

= + = drivers. On average, 5 customers are in the system, which is 67


percent more customers than the current system allows.
d.
( ) ( )
10 10
0.417 minutes 25 seconds
12 12 10 24
q
W


= = = = =

. The waiting time
will double with the new system.
e.
1
30
s q
W W

= + = seconds. The time in the system will rise by 67 percent.


The employee system seems to be better overall.

A-78
D.5 a. Each server handles 60 registrants hour , so it takes 4 servers to handle
200 arrivals hour
b., c. 200 = , 60 = , 4 M = servers yields: 3.29
q
L = , 0.0164
q
W = hours
Server cost 4 $15 $60 = =
( )( )( ) ( ) Wait cost 3.29 people 0.0164 hour $100 $5.38 rounded = =
Total cost = $65.30
With 5 servers, 0.65
q
L = , 0.0033
q
W =
( )( )( ) Wait cost 0.65 0.0033 $100 $0.21 = = , Server cost 5 15 $75 = =
Total cost = $75.21
The system is optimal with 4 servers.
d. Server utilization rate 83.33% = .

D.6 a. The optimal number of servers is again 4.
b. The wait cost is now $50 person hour
q q
L W (which are the same as in
Problem D.5). Entertainment cost = $15 hour ,
( )( )( ) ( ) Wait cost 3.29 0.0164 $50 $2.70 rounded = =
Total cost $15 $60 2.70 $77.70 = + + =

D.7 15 hour = , 20 hour =
a. 0.075 hours 4.5 minutes
q
W = =
b. 1.125
q
L = people

D.8 10 hour = , 30 hour =
a.
1
0.0083 hours minute
2
q
W = =
b. 0.083
q
L = people





A-79

E
MODULE


Learning
Curves





E.1 In order to estimate the learning curve rate, we take the ratios of the units that have
doubled.


report 2 56
0.848
report 1 66
report 4 49
0.860
report 2 56
report 6 45
0.849
report 3 53
report 8 42
0.857
report 4 49
= =
= =
= =
= =


The learning curve rates are not identical for each paired comparison, but since they are in
the range of 84 percent to 86 percent, we can safely use 85 percent.

E.2 Since the 6th report took 45 minutes, the 12th unit should take 85 percent of 45 minutes, or
38.25 minutes. Multiplying again by 85 percent yields a time of 32.5 minutes for the 24th
report. One more multiplication yields a time of 27.6 minutes for the 48th report. An even
more exact answer can be found using Excel OM or POM for Windows software. Or a third
approach is the formula
1 N
T TC = where 0.402 C (from Table E.3);
( )( )
48
66 0.402 26.5 T = = minutes.

E.3
1 N
T TC = where 0.400 C = (from Table E.3), ( )( )
50
66 0.400 26.4 T = = minutes

E.4
1 N
T TC = where 25.513 C = and
N
T is now cumulative time.
( ) ( )
50
66 25.513 1, 683.85 minutes 28.06 hours T = = =


A-80

F
MODULE



Simulation





F.1 We will use the following random number intervals when simulating demand and lead
time. We will select column 1 of text Table F.4 to get the random numbers for demand,
while we will use column 2 of the same table to find the lead time whenever an order is
placed.


Probability
Cumulative
Probability
RN
Interval

Demand
0.20 0.20 0120 0
0.40 0.60 2160 1
0.20 0.80 6180 2
0.15 0.95 8195 3
0.05 1.00 9600 4


Probability
Cumulative
Probability
RN
Interval
Lead
Time
0.15 0.15 0115 1
0.35 0.50 1650 2
0.50 1.00 5100 3

The results are:

Units
Received
Begin
Inv.

RN

Demand
End
Inv.
Lost
Sales

Order?

RN
Lead
time
5 52 1 4 0
4 37 1 3 0
3 82 3 0 0 Yes 06 1
0 69 2 0 2
10 10 98 4 6 0
6 96 4 2 0 Yes 63 3
2 33 1 1 0
1 50 1 0 0
0 88 3 0 3
10 10 90 3 7 0
Total 23 5

The total stock out cost = 5($40) = $200. The total holding cost = 23($1) = $23.
A-81
F.2 If the reorder point Problem F.1 is changed to 4 units, we have:

Units
Received
Begin
Inv.

RN

Demand
End
Inv.
Lost
Sales

Order?

RN
Lead
time
5 52 1 4 0 Yes 6 1
4 37 1 3 0
10 13 82 3 10 0
10 69 2 8 0
8 98 4 4 0 Yes 63 3
4 96 4 0 0
0 33 1 0 1
0 50 1 0 1
10 10 88 3 7 0
7 90 3 4 0 Yes 57 3
Total 40 2

The total stock out cost = 2($40) = $80. The total holding cost = 40($1) = $40. The total
cost is $120 with a reorder point of 4 and $223 with a reorder point of 2. (Same random
numbers were used as in Problem F.1).

F.3 Since average waiting time is a variable of concern, a next event time increment model
should be used.

(1)
Customer
Number
(2)
Random
Number
(3)
Interval to
Arrival
(4)
Time of
Arrival
(5)
Random
Number
(6)
Service
Time
(7)
Start
Service
(8)
End
Service
(9)
Wait
Time
(10)
Idle
Time
1 50 2 9:02 52 3 9:02 9:05 0 2
2 28 1 9:03 37 2 9:05 9:07 2 0
3 68 2 9:05 82 3 9:07 9:10 2 0
4 36 1 9:06 69 3 9:10 9:13 4 0
5 90 4 9:10 98 4 9:13 9:17 3 0
6 62 2 9:12 96 4 9:17 9:21 5 0
7 27 1 9:13 33 2 9:21 9:23 8 0
8 50 2 9:15 50 3 9:23 9:26 8 0
9 18 1 9:16 88 4 9:26 9:30 10 0
10 36 1 9:17 90 4 9:30 9:34 13 0
11 61 2 9:19 50 3 9:34 9:37 15 0
12 21 1 9:20 27 2 9:37 9:39 17 0
13 46 2 9:22 45 2 9:39 9:41 17 0
14 01 0 9:22 81 3 9:41 9:44 19 0
15 14 1 9:23 66 3 9:44 9:47 21 0

Read the data as in the following example for the first row:
Column 1: Number of customer.
Column 2: From third column of random number Table F.4.
Column 3: Time interval corresponding to random number (random number of 50 implies a 2-minute interval).
Column 4: Starting at 9 A.M. the first arrival is at 9:02.
Column 5. From the first column of the random number Table F.4.
Column 6: Teller time corresponding to random number 52 is 3 minutes.
Column 7: Teller is available and can start at 9:02.
Column 8: Teller completes work at 9:05 (9:02 + 0:03).
Column 9: Wait time for customer is 0 as the teller was available.
Column 10: Idle time for the teller was 2 minutes (9:00 to 9:02).

The drive-in window clearly does not meet the managers criteria for an average wait time
of 2 minutes. As a matter of fact, we can observe an increasing queue buildup after only a
few customer simulations. This observation can be confirmed by expected value
calculations on both arrival and service rates.
A-82

F.4 Time Until
Next Arrival
(Minutes)


Probability

Cumulative
Probability
Random
Number
Range
0 0.1 0.1 0009
1 0.2 0.3 1029
2 0.3 0.6 3059
3 0.4 1.00 6099

Service
Time
(Minutes)


Probability

Cumulative
Probability
Random
Number
Range
1 0.1 0.1 0009
3 0.5 0.6 1059
5 0.2 0.8 6079
10 0.2 1.00 8099

F.5 Simulating employment of one detailer:

Detailer 1
Random
*

Number

IAT
Random
**

Number
Service
Time
Arrival
Time
Time
In
Time
Out
Wait
Time
52 2 06 1 2 2 3
37 3 63 3 5 5 8
82 2 57 2 7 8 10 1
69 0 02 1 7 10 11 3
98 3 94 4 10 11 15 1
96 3 52 2 13 15 17 2
33 2 69 3 15 17 20 2
50 2 33 2 17 20 22 3
27 1 32 2 18 22 24 4
45 2 30 2 20 24 26 4
81 3 48 2 23 26 28 3

Maximum waiting time: 4 minutes. Total waiting time: 23 minutes. 4 minutes will not meet
the 2.5 minute criteria.

*
From Column 1 of Table F.4 in text.
**
From Column 2 of Table F.4 in text.
A-83
F.6 Simulating employment of two detailers:

Detailer 1 Detailer 2
Random
Number

IAT
Random
Number
Service
Time
Arrival
Time
Time
In
Time
Out
Time
In
Time
Out
Wait
Time
52 2 06 1 2 2 3
37 3 63 3 5 5 8
82 2 57 2 7 7 9
69 0 02 1 7 8 9 1
98 3 94 4 10 10 14
96 3 52 2 13 13 15
33 2 69 3 15 15 18
50 2 33 2 17 17 19
27 1 32 2 18 18 20
45 2 30 2 20 20 22
81 3 48 2 23 23 25

Maximum waiting time: 1 minute. Total waiting time: 1 minute. Two detailers with a
waiting time of one (1) minute will meet the 2.5 minute criteria.