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MGT314Spring2013FinalSampleQuestions

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[3]Brieflydescribeeachofthecostsassociatedwithinventory.
[3]HowwouldyourespondtothecriticismthatEOQmodelstendtoprovidemisleadingresultsbecause
valuesofD,S,andHare,atbest,educatedguesses?
[8] A small manufacturing firm uses roughly 3400 pounds of chemical dye a year. Currently the firm
purchases300poundsperorderandpays$3perpound.Thesupplierhasjustannouncedthatordersof
1000poundsormorewillbefiledatapriceof$2perpound.Themanufacturingfirmincursacostof$100
eachtimeitsubmitsanorderandassignsanannualholdingcostof17percentofthepurchasepriceper
pound.

(a) Determinetheordersizethatwillminimizethetotalcost.
(b) Ifthesupplierofferedthediscountat1500poundsinsteadof1000pounds,whatordersizewould
minimizethetotalcost?

4. [12]GardenVarietyFlowershopsuses750claypotsamonth.Thepotsarepurchasedat$2each.Annual
carryingcostsareestimatedtobe30percentofcost,andorderingcostsare$20perorder.Themanager
hasbeenusinganordersizeof1500flowerpots.Thestoresaccountingfirmestimatescarryingcostto
be30percentofpurchaseofpriceperunit.Themanagercontinuestouseanordersizeof1500flower
pots.

5.
6.

a.

Whatadditionalcarryingcostistheshopincurringbystayingwiththeordersize?

b.

Otherthancostsavings,whatbenefitwouldusingtheoptimalorderquantityyield?

[2]Isitpossibletoconstructameanchartiftheonlyinformationavailableisintheformofsamplemean
andsamplerange?Explain.
[4]Collegestudentstryingtoregisterforacoursesometimesfindthatthecoursehasbeenclosed,orthe
sectiontheywanthasbeenclosed.Prepareacauseandeffectdiagramforthisproblem.