Chapter 8

Problem Summary Prob. # 8.1 8.& 8.* 8., 8.0 8.3 8.4 8.8 8.5 8.16 8.11 8.1& 8.1* 8.1, 8.10 8.13 8.14 8.18 8.15 8.&6 8.&1 8.&& 8.&* 8.&, 8.&0 8.&3 8.&4 8.&8 8.&5 Concepts Covered E ! " Determinin# !$ and % 'll (nits !uantity Discount )odel Production Lot Si+e )odel Planned Shorta#e )odel- Determinin# the Percenta#e of Customers Placed on .ac/order Periodic %evie1 2nventory " Determinin# the rder !uantity Sin#le Period 2nventory )odel E ! " Determinin# !$ and % Production Lot Si+e )odel Planned Shorta#e )odel- Determinin# the Percenta#e of Customers Placed on .ac/order 'll (nits !uantity Discount )odel Periodic %evie1 2nventory " Determinin# the rder !uantity Sin#le Period 2nventory )odel- Determinin# the E7pected Profit E ! " Determinin# !$ and % E ! " %oundin# ff the Solution E ! " %oundin# ff the Solution E ! " Comparin# 8otal Costs 2f the Demand 9orecast 2s 2n Error Periodic %evie1 Policy " Determinin# the rder !uantity Periodic %evie1 Policy " Determinin# the rder !uantity 9orecastin# Demand- Determinin# Safety Stoc/ .ased on Cycle Service Level- E ! 'll (nits !uantity Discount Production Lot Si+e )odel Production Lot Si+e )odel- E7aminin# the Effect of Chan#es in :oldin# Cost E !- Determinin# Safety Stoc/ .ased on a Cycle Service Level - Determinin# the Profit of Carryin# an 2tem 'll (nits !uantity Discount Sin#le Period 2nventory )odel Sin#le Period 2nventory )odel Planned Shorta#e )odel Periodic %evie1 Policy " Determinin# the rder !uantity and Safety Stoc/ for a Cycle Service Level 'll (nits and 2ncremental !uantity Discount Schedule- Calculatin# Discount .rea/s Chapter 8 ; 1 Level of Difficulty 1 & & * * & 1 & * & * * 1 1 1 & & & , * & * , * 1 * & * , Notes

Note that the #ood1ill cost is ne#ative

8.*6 8.*1 8.*& 8.** 8.*, 8.*0

8.*3 8.*4 8.*8 8.*5 8.,6 8.,1 8.,& 8.,* 8.,, 8.,0 8.,3 8.,4 8.,8 8.,5

Production Lot Si+e )odel Planned Shorta#e )odel " Evaluatin# Different Customer Satisfaction Plans- Determinin# the Profit of Carryin# an 2tem Planned Shorta#e )odel- Determinin# the Profit of Carryin# an 2tem Sin#le Period 2nventory )odel Sin#le Period 2nventory )odel " Sensitivity 'nalysis Determinin# the rder !uantity for a Periodic %evie1 )odel- 'll (nits and 2ncremental !uantity Discount Schedule- Calculatin# Discount .rea/s- Determinin# the %eorder Point and Safety Stoc/ for a Cycle Service LevelDeterminin# the ptimal 2nventory Plan Comparin# the E ! and Planned Shorta#e )odels )a/e or .uy Problem " Comparin# the E ! and Production Lot Si+e )odels 2ncremental Discount Schedule Sin#le Period 2nventory )odel Sin#le Period 2nventory )odel Planned Shorta#e )odel Production Lot Si+e )odel ;; Evaluatin# Different Production Systems )a/e or .uy Problem " Comparin# the E ! and Production Lot Si+e )odels Sin#le Period 2nventory )odel Sin#le Period 2nventory )odel E !- Evaluatin# the Effect of Chan#in# the :oldin# Cost Comparin# 'nnual Profits (sin# the E ! )odel to Evaluate 81o Different Purchase Plans 'll (nits !uantity Discount Schedul 'll (nits !uantity Discount )odel

& 0 * 1 & 8

0 3 * 1 * * 0 3 1 * * , * 4 Note that the salva#e value is ne#ative

Note that the #ood1ill cost is ne#ative

8his problem re<uires students to determine the <uantity price brea/s from /no1in# the dollar price brea/s. 8hey should use the discounted price per unit in calculatin# the brea/ points.

8.06

9orecastin# Demand- Determinin# Lead 8ime Demand and Safety Stoc/ .ased on (nit Service Level- E !

3

Chapter 8 ; &

Problem Solutions 8.1 See file Ch8.1.7ls

!$ = *,6

% = &0

Culton should order *,6 bottles 1hen the inventory reaches &0 bottles.

Chapter 8 ; *

4000 1$.. :and calculations? Level 6 1 & * %an#e 1" 1666 1661 " 0666 0661 " 16666 16661 or more (nit Cost 13 10.666A 1...13@0661AB& &.0.&41 falls inside the <ualifyin# ran#e it stays unmodified and the correspondin# orderin#.&41AB& &.&. . D = Per Unit Cost.. = * o+ Cycles Per .&@16.%) 14%66.com should order 16-661 pairs of >eans.# 4)16 TC(Q*) 163$##%.and purchasin# cost need to be calculated. 11 = !alues 104000. Co = 0ead ime !in years".013 )odified !i .00 16. .0.A = &..= (eorder Point.13* .&8 Since .1) %. .%000 14.&A = &.10@10.&41 &66@16.#601 14%66.&41 0661 16661 rderin# Cost Non &66@16.0#616$46% 10. ( = otal Annual Cost.@16.00 0.00 !alues 10001 0.## 1)03160.$#.13* falls above the ran#e its unit cost applies it is non optimal . C = Annual &oldin' Cost (ate.ear.666AB1666 1 :oldin# Cost &.&41 .&3-386 is attained at ! = 16661.666A 8otal Cost 10560*8 1064136 1426680 . 0 = 1a+ety 1toc2.10@1. Since .6. & = Annual &oldin' Cost Per Unit.@16661AB & Purchasin# Cost ptimal 10.& 1.666AB.& See file Ch8.1 Modified Q* 416$ 4%31 )001 10001 Price..7ls Calculation of Optimal Inventory Policy Under All-Units Quantity Discounts OPTIMAL OUTPUT Order quantity. Q* = Cycle ime !in years".. 8he same concept applies to !* = .13 Since ...*85 falls to the left of the <ualifyin# ran#e it needs to be increased until at 0661it <ualifies for the discounted cost of C1.3 !i .666AB0661 &66@16.8.0000 1). 1*.013.6.)art.holdin#..00 1)#0)$. ptimal policy? rder 16661 pairs because the minimum total cost of C1-.666A 1*. C!Q*" = INPUT Annual Demand..3@16.*85 . C/ = Order Cost.4000 %00.6000 Q* 416$ 4%31 4$.1 DI COUNT Level 0 1 % $ Breakpoin t 1 1001 )001 10001 Discount Price 16. Chapter 8 .&8@.

0 . 8here 1ill be * production runs per year.6 :oldin# rate = : = .8.& Production lot si+e = !$ = N= DB! = 3666B&666 = * Chapter 8 .* 'D) should manufacture &-666 units durin# each production run.666 Set up cost = C6 = &666 (nit cost = C = . :and Calculations? 'nnual demand = D = 1&@066A = 3666 'nnual production = P = 1&@&666A = &.

. :and Calculations? 8his is the E ! model 1ith planned shorta#es.8.. playhouses.. 3 .5. Ch = 1066.5.and S$ = 1..5.5.F Co = 1066F L = 1 month. 'ppro7imately 1. units are not sold on timeA.7ls Playhouse Dorld should order 1.18 @this is so because the cycle demand is 1*. 'fter the substitutions of the parameter values 1e have ! $ = 1*.B1*.63 Chapter 8 . Note? 8he reorder point is % = LD " S = @1monthA@monthly demandA " shorta#e = 1@&A " 1.. Cs = 06$0& = &366F Cb = 16F C = *066F D = &@1&A = &. = . 8he percenta#e of customers 1ho 1ill have to 1ait is 1.38.38 of 1hich 1. See file Ch8.38$166 = 1.E of customers 1ill have to 1ait for delivery.

7ls SportDorld.8. Chapter 8 .0 do+en #olf balls.com should order 1.0 See file Ch8.0. 4 .

8.7ls %aulGs .a/ery should ba/e 43 loaves of bread each day.3.3 See file Ch8. Chapter 8 . 8 .

8.6F C6 = *6F : = .7ls a.6@1B0&A H 166 = .36F L = 1 1ee/F SS = 166 a. b. :and Calculations D = *&6@0&A = 133. 5 .4 See file Ch8.F C = .8 bo7es of pasta.&6 bo7es. %e.. 8he order should be placed 1hen the inventory level reaches .&6 Chapter 8 .4. 9ood 8o1n should order *-.1. rder si+e? b.order point % = DL H SS= 133.

. C = Annual &oldin' Cost (ate.00 %. ( = otal Annual 5aria6le Cost. D = 106@*30A = 0.7ls Determination of Inventory Policy for Production Lot i"e Model OPTIMAL OUTPUT Order Quantity.406F P = 06@8A@*30A = 1. C!Q*" = INPUT Annual Demand. 11 = !alues )43)0.8.ear.= (eorder Point. C/ = 1et U4 Cost.%) 0.See file Ch8. = * o+ Cycles Per . P = 0ead ime !in years". & = Annual &oldin' Cost Per Unit.%0 0. 16 .&F Co =56 Chapter 8 . Co = Annual Production (ate.00 146000.00 !alues )#1#.46 )other SmithGs should ba/e 05&0 pies per production lot. D = Per Unit Cost.4)00 #0.&0F : = . Q* = Cycle ime !in years". 5!Q*" = otal Annual Cost.3666F C = &. 0 = 1a+ety 1toc2.

11 . Chapter 8 .5. No one 1ill have to 1ait for their 1ashin# machines.8.5 See file Ch8.7ls a. 'ppliance 'lley should order ** 1ashin# machines b.

Gs.16 See file Ch8.7ls Iei#lerGs Lumber Supply should order 1-666-666 board feet of & by . 1& .16. Chapter 8 .8.

7ls .8.11 See file Ch8.an/ Dru#s should order 141* tablets. Chapter 8 . 1* .11.

. 9urrGs 1ill have an e7pected profit of appro7imately C1-148. Chapter 8 . 1.1&.8.1& See file Ch8. b. 9urrGs should order &44 calendars.7ls a.

B&AH.1*. SS = 10 a.5A . 10 .&@. .13F Co = &0.. b. 8his solution assumes demand occurs at a constant rate and 1ill continue on at this rate forever.AH. Days bet1een orders = !$BD years = !$BD$*30 days = . 8otal 'nnual Cost @includin# holdin# cost of safety stoc/A = CoDB!$HCh@!$B&AHCDHChSS = &0@&000B85. C&-185.uyri#ht should order LDHSS = @0B*30A&000H10 = 06 ra+ors.08.8.54$*30 = 1&8 calendar days c. Stic/ ra+ors and use a reorder point of % = Chapter 8 .and the Pro>ected Net 'nnual Profit = &-000$@C1.8@&000AH.*4 = C1-314.13@10A = C&-185.7ls :and Calculations? D = 4@*30A = &000F Ch = .1* See file Ch8.*4.13@85.8A = .*.

7ls a.=C:C0 . Stic/ ra+ors @3 lots of 1.1. See file Ch8. Solver chan#es are Chan#in# Cell becomes J1* 1ith constraints J1* = 2nte#er and J1. Days bet1een orders = . CJC1..5A .$1. C&-156.in J1* and a constraint in cell J1. b... .46. Chapter 8 .1.uyri#ht should order !$ = 83.. = 6. 8otal 'nnual Cost @includin# holdin# cost of safety stoc/A = C&-156.&0 = C1-313.A and use a reorder point of % = 00 ra+ors. 13 .number of lots.&0 and the Pro>ected Net 'nnual Profit = &-000$@C1.**8&$*30 = 1&* calendar days c.. 8his solution can also be obtained by addin# a cell for NL..8.

&5A . 8he number of days bet1een orders = . C13-0*3.10 See file Ch8.8.&0 bo7es.&0 and the Pro>ected Net 'nnual Profit = 13-566$@C1.&0 = C0-&3. 14 .3 calendar days c. 8he order <uantity is !$ = &-&66 bo7es or && increments 1hen the inventory level reaches % = .1*6*$*30 = .10.7ls a.40. 8otal 'nnual Cost @includin# holdin# cost of safety stoc/A = C13-0*3. b.4.. Chapter 8 .

13 See files Ch8. 18 .7ls and Ch8.7ls a. Chapter 8 . 8he optimal order <uantity is !$ = &-.66 bo7es.13a.13b. a.8.

8.13b See file Ch8.7ls b. C15-6..41 .6.13b. 15 .0 = C1. C15-6.&3 Chapter 8 .1.

14. &6 .14 See file Ch8.7ls 8he optimal order <uantity is !$ = 100 Chapter 8 .8.

18 See file Ch8.8. &1 .7ls 8he optimal order <uantity is !$ = 1*0 Chapter 8 .18.

0A 1hich yields +SL = @06 " .. 8otal annual inventory cost @includin# safety stoc/ holdin# costA = CoDB!$ H Ch!$B& H ChSS H CD = C5-5. Chapter 8 .53$σL = 1.1ee/ lead time 1e have µL = &1$& = .0A = 5.. :ence.3. ' 53E cycle service level corresponds to a + value of appro7imately 1.&AB0. Dhat is the ne1 cycle service levelK 9rom the reorder point formula 1e have 06 = µLH+SLσL = .53$σL = .8. 8he service level is found from the normal table or from =normdist@1.40$0.0 = 01. = 0& @rounded upA.4A = . b.4.15 See file Ch8.7ls D = 0&$&1 = 165&.40@0.0*40A Comment? Suppose mana#ement decides to set the re.order point at % = 06 units..& = 8. So for a &.1318$*30 = 05 calendar days c.0 @#ivenA. && . Days bet1een orders e<uals !$BD = .the reorder point e<uals µ H +.15.. 8he safety stoc/ for this case is 06 " .0 = 1.1318 years = .0.& and σL = 0. a.40.5* @note that the safety stoc/ = SS = +..5&5. 9rom the sample the 1ee/ly mean demand based on the 8 1ee/s movin# avera#e approach = &1... 8he optimal order <uantity is !$ = 144 @roundedA based on the E ! model.&H+SL@0.& H 1.

8he optimal order <uantity is !$ = .*. Chapter 8 .&6. 8otal annual cost @includin# holdin# cost of safety stoc/A = C&1-1. Number of days bet1een orders = .35 De assume demand occurs a constant rate and 1ill continue on at this rate forever.66 and the reorder point is % = 3* b.&6 See file Ch8.7ls a.*&60$*30 = 114 calendar days c.safety stoc/ 1as ordered at the discount price and the only cost associated 1ith the safety stoc/ is the holdin# cost.8. &* .

.6*50 years = . Number of days bet1een the start time of successive production runs = 8 = ! $BD = . Len#th of a production run = @!$BP per hourA H& = 01-*&6B1666 H & = 0*.8. 8he optimal production batch is obtained from usin# the formula 8otal annual orderin# and holdin# cost = C13-. b. = 01-*&6 bottles. &.7ls :and Calculations D = &0666@0&A = 1-*66-666F P = 16666@3A@0&A = *-1&6-666F Co = *&0F Ch = .&1. 6*50$*30 = 1.&.* hours Note that hourly production = 16-666B16hours = 1-666 c. calendar days..30.00 a.&1 See file Ch8. Chapter 8 ..

Chapter 8 . &0 .De assumed that demand occurs at a constant rate and production 1ill not be interrupted by 1or/ stoppa#es.

8.80-514 8he len#th of a production run = . &3 .* hours b.0..* calendar days.6&*1$*30 = 8.7ls a.&&a.80-514B @&$36$36A H 06B36 = 38. a. c. Chapter 8 . 8he optimal production batch si+e is !$ = .7ls and Ch8. 8otal annual inventory cost = C*8-850.&&b.&& See files Ch8. Number of days bet1een the start time of successive production runs = .

8he optimal production batch si+e 1ould increase to !$ = 0*&-&50 8he len#th of a production run 1ould e<ual 0*&-&50B@&$36$36A H06B36 = 4.7ls d.43 hours Chapter 8 ..8.&&d.&& d. &4 . See file Ch8.

Clic/ 1ould li/e the cycle service level to be 1 . c. b.40 = C*50-36.55A .&*.&* See Ch8.5. :ence. = 55 @See the Cycle Service Level 1or/sheetA and the safety stoc/ is +$σ = 1. 8here are 0&$3 = *1& 1or/in# days in a year. &8 .the reorder point = µ H +$σ = 46 H 1.. Pro>ected annual profit = *1&6$@C3.6.6.53$10 = 55.8$*1& = 4. 8he number of inventory cycles per year = *1&6B44 = .because this reorder point e7ceeds the order <uantity of 44orders must be placed one inventory cycle early 1hen the inventory level reaches 55 . 8he + value correspondin# to this service level is appro7imately + = 1.53. :ence.015 = 54. :o1ever. C1-3*&-*3.015. 8he optimal order <uantity is !$ = 44 1ith a reorder point of &&. 44 = &&..0&E..60 Chapter 8 . 8otal annual cost @includin# holdin# cost of safety stoc/A = C1-3*&-*3.7ls D = 0&$36 = *1&6 Lead 8ime Demand L N@µ = 46.the number of days bet1een orders = .53$10 = &5.σ = 10A a.8. 6&.4.. 1B. :ence.40 d. 1or/in# days.

8here are 0&$3 = *1& 1or/in# days in a year..30$10 = 43.6*. See file Ch8. :ence.55A . d. b.. C1-015-8.30$10 = 4..6* = C068-115. &5 .. 8he number of inventory cycles per year = *1&6B1666 = *.7ls a.8.the number of days bet1een orders = . 8herefore the reorder point = µ H +$σ = 46 H . 8he optimal order <uantity becomes !$ = 1666 1ith a reorder point of 44.5. :ence.&.1&.1& = 34.5. *&60$*1& = 166 1or/in# days. 1B*.5.540 = 44 and the safety stoc/ is +$σ = .50E. Pro>ected annual profit = *1&6$@C3.Clic/ 1ould li/e the cycle service level to be 1 .&. 8he + value correspondin# to this service level is appro7imately + = . c.30.45 Chapter 8 . 8otal annual cost @includin# holdin# cost of safety stoc/A = C1-015-8.

8*.8..&0 See file Ch8. *6 .%. 8he e7pected profit 1ould e<ual C1-0*. Chapter 8 .7ls )as/s.(s should order !$ = 1-6.&0.4.

b.&3. De assumed the company pays a royalty on plates produced even if they are destroyed.6A.. Chapter 8 . S/ip Junther should produce 1814 plates @note #ood1ill cost is . c.8. *1 .7ls a. E7pected profit = C53-*3.C.&.&3 See file Ch8.

1&55$*30 = . C11-53&. c..&4.4. calendar days. Chapter 8 .8.661& = 1E.$@C*&.50A . 8otal annual cost = C11-53&.58.8& Pro>ected annual profit = 3&.&4 = &* . 8he percenta#e of customers 1ho 1ill be placed on bac/order = 1B81 = . 8he optimal order <uantity is !$ = 81 1ith a reorder point = &*.7ls a. *& . d.8& = C8-054.&4 See file Ch8. b. 8he number of days bet1een orders = .

8.&8.7ls 9or this problem one needs to consider the probability of a stoc/ out over the entire revie1 period @three 1ee/sA. 8his results in a reorder point of 464 units.&8 See file Ch8.53. ** . Chapter 8 . 8he mean demand is 366 and the standard deviation of demand is 01.

. b. Chapter 8 .8.&8 continued a. 8he safety stoc/ = 164 units. *. 8he optimal order <uantity is !$ = 344.

&5. *0 . Dith an all.8.&5 See file Ch8.units discount policy !$ = 5-666 Chapter 8 .7ls a.

&5b. *3 . 8he reorder point is 0435 pounds. Chapter 8 . Dith an incremental discount policy !$ = 1.-156 c. De assumed that demand is constant and 1ill continue on at the same rate forever.8. b.

:0 M= 406.*6amaretto.day supply of the coffeeA Note.7ls 9or 9rench %oast !$ = 406 @Since they 1ill not roast more than a 16. *4 .8.*6 See files Ch8.findin# this solution re<uires the Solver constraint.7ls and Ch8.*6french. Chapter 8 .

8.*6 continued 9or 'maretto Cream !$ = &66 @since the store 1ill not roast more than a 16.day supply of the coffeeA Note.:0 M= 406.findin# this solution re<uires the Solver constraint. Chapter 8 . *8 .

*5 .7ls and Ch8.*1a.*1b.8.7ls Plan 2 Chapter 8 .*1 See files Ch8.

6 . and the reorder point is 14. . !$ = ...*1 continued Plan 22 a. 8he e7pected annual profit = 186$@C185A . c. (nder Plan 2 .41 = C10-381. C18-**8. PeteNs should adopt Plan 2 and #ive one pound of coffee free to bac/ordered customers as the annual inventory costs are sli#htly lo1er under this plan. b.8.&5 Chapter 8 .

7ls a. 8he number of 1ee/s bet1een orders = . b. 'nnual profit on cash re#isters = *566$@C86A .1 . . 8he optimal order <uantity is !$ = 111 and the reorder point is % = *5. Chapter 8 ..*&. c.6&80$0& = 1. C4-630.8.profit can also be e7pressed as net sales less total costs as depicted in cell E13. ..8.01 = C*6..*& See file Ch8.5 Note. d.-5*. 8he percenta#e of customers 1ho 1ill be placed on bac/order = 6E.

Chapter 8 .**.& .8. .7ls Clothesline should order 5051 scarves. De assume Clothesline 1ill only #et one order delivered durin# the season.** See file Ch8.

7ls.*.7ls.*.Ch8.d. See files Ch8.8.b.16.7ls a.c.*.!$ = &61. 2f # = C.7ls.* . .Ch8.Ch8.*.a. Chapter 8 .*.

..*.8. b. 2f # = C. b.06. Chapter 8 .!$ = &1. ..

8. Chapter 8 . c. 2f # = C1.*. .!$ = &&&.66. c.0 .

2f # = C0. . d.!$ = &*.66.8.*. d.3 . Chapter 8 .

68.+ = &. b. Circle 4 should order !$ = 566 cases. 8otal annual cost = annual holdin# cost H cost of the cola = @*6H&8A$@C1. . 8he reorder point is 88.!$ = @8HLA$D H SS . Since Circle 4 1ants a 55E cycle service level. Oes. e. c.4 .*0c.63&0A H 36$0&$.*0#. c. 8otal annual cost = C11-488.7ls and Ch8. S: = @1A$36 H&5 .8. && = 33.&0 = C1*-*&&.40.7ls a.*0 See files Ch8. Chapter 8 . f.σ= 1&A. d.the annual costs decrease by appro7imately C1-066 if Circle 4 ta/es advanta#e of the discount schedule.** and the safety stoc/ = +$σ = &. :ence.**$1& = &8. Lead time demand L N@µ = 36..

*0 #. Chapter 8 . See file Ch8.8. &8 = &&&. 2n this case.1ith a safety stoc/ of &8.and the total annual cost = C1&-.*0#.45.8 . .the reorder point e<uals 36 H &8 = 88..7ls #.5.the optimal order <uantity is ! $ = &06 .

*3 See file Ch8. Chapter 8 .64.7ls a. .5 .*3. a. 8he optimal order <uantity is !$ = . Profit = C&&-**&.3 % = &.8.

8he optimal order <uantity is !$ = .8. 06 . Profit = C&&-.*3 b.allo1in# for bac/orders increases profit by appro7imately C106 per year. Chapter 8 . b. Oes.8.. c.3 1ith a reorder point % = 14.&8.

8he optimal order <uantity is !$ = 11-601 and the reorder point is % = 5-3*&. 8otal annual cost @includin# holdin# cost of safety stoc/A = C1-44*-0&4. Cycle 8ime = .8.55.*4. Chapter 8 . 6485$*30 = &5 calendar days.*4 See file Ch8.7ls a. 01 .

. c. 0& .. 8otal annual cost @includin# machine lease costA = C1-415-1.*4 b.-1. b.08.-1.house production.*. 8he optimal batch si+e is !$ = .*B&-666 = && 1or/in# days or &3 calendar days. Company should be#in in.*10*$*30 = 110 calendar days. 2t 1ill save about C06-666 per year.08 H C0-666 = C1-4&. 8he len#th of a production run = .... Cycle 8ime = .-1.8. Chapter 8 ..

01 Chapter 8 .7ls a. 8he optimal order <uantity is !$ = *4-.*8 See file Ch8. 0* .&4 b. 8otal annual cost = C1-46*-8&&.*8.8.

7ls PohansenGs should purchase !$ = 8* 1affle cones daily.8.*5. Chapter 8 . 0.*5 See file Ch8. .

00 .6 See 9ile ch8...8. Chapter 8 .7ls 9ran/Gs should order 0 mo1ers at the temporary discount.6.

03 . (nited Parcel Delivery should order !$ = 1* en#ines 1hen the stoc/ on hand reaches % = 0 en#ines...*-310.8. b. 8otal annual cost = C1.1.1 See file Ch8.*8 Chapter 8 .7ls a.

the annual profit to the firm usin# machine 2 is C.& See file Ch8.8.#ivin# a value of 7 = 58-4. Dith this reduction in the production <uantity.-666 setup cost is char#ed once durin# the year and not amorti+ed over more than one yearA. C.cannot e7ceed the three 1ee/ demand.-610-666A7.6-666 . 8he ma7imum inventory from a production level.7.-610-666AE of fran/furters satisfy the demand.the production <uantity must be reduced from *46-6*& do1n to 58-4.1-&66-666B. Durin# production@1-&66-666B.&.ecause the fran/furters cannot be /ept for more than three 1ee/s. C.-666 = C103-406 @note that this assumes the C.44 = @1 . Note? 8o determine the ma7imum number of fran/furters that can be sold over the three 1ee/s 1e solve the follo1in# e<uation for 7? 35-&*6. 8hree 1ee/ demand is @*B0&A$@1-&66-666A = 35-&*6. Chapter 8 . :ence.&. 2f the firm uses )achine 22 1e have the follo1in# output . 1-&66-666B.this is the ma7imum amount the company could sell and it 1ould not have any inventory.&6$1-66*-406 .44.the profit is lo1er usin# machine 22 than 1ith machine 2..7ls 2f the firm uses machine 2 since P = &-406$*30 = 1-66*-406.. 04 .the remainder @1.&22.-610-666A #o to inventory.

8.,* See file Ch8.,*.7ls

a. 2f )ercury purchases the laces the optimal order <uantity is ! $ = 13,-46& and the reorder point % = &6-6&5. 8he number of days bet1een orders = .*01,$*30 = 1&8 calendar days. 8he total annual cost @includin# safety stoc/ holdin# costA = C14-63,.18.

Chapter 8 ; 08

8.,* b.

b. 2f )ercury produces the laces in;house the optimal production <uantity is ! $ = ,,0-4*6. Production run time = ,,0-4*1B@&-666-666B@&36$16AA H , = 045.,0 H , = 08*.,0 hours and the number of days bet1een the start of successive production runs = .5464$*30 = *0,.* calendar days. 8otal annual cost @includin# machine lease costA = C13-*,&.14 H C1-866 = C18-1,&.14. c. )ercury should continue to purchase laces from 8iri#ht as the cost 1ould be over a C1-666 less per year.

Chapter 8 ; 05

8.,,

8he troop should purchase !$ = &6, trees.

Chapter 8 ; 36

31 . Chapter 8 .7ls Business Daily should place !$ = .8.0 See file Ch8.6 ne1spapers in the /ios/.0...

-5&&. b.640&$*30 = &4 calendar days.0* Chapter 8 .3a..7ls a. 2be7 should order !$ = &-.3 See files Ch8.8.-1.41 chairs 1hen the inventory level reaches % = 1-184 units. 8otal annual costs @includin# holdin# cost of safety stoc/A = C*&..3c. 3& . 8he number of days bet1een orders = .03A = C*&.&.7ls and Ch8.0* H 066$@C1..

3* . 8he order <uantity 1ould decrease to !$ = &-&*6.3c. Chapter 8 .3 c.7ls c. 'n order 1ould be placed 1hen the inventory level reaches % = 1-*&5 units... See file Ch8.8.

5&.&. Chapter 8 .it is not 1orth s1itchin# manufacturers.8. :ence.4. 3..4 See file Ch8.. .7ls 8he cost of the ne1 supplier is C**6-5.

8he reorder point is % = 066 H 06 = 006.-485.8.&6. b. 8he optimal order <uantity is !$ = 0-666.*8. 8he number of days bet1een orders is . Chapter 8 . c..7ls a.6 calendar days.8 See file Ch8. 30 .. d. 8otal annual costs @includin# holdin# cost of safety stoc/A = C&.8.3$*30 = 1.

% = L$D H SS .5.. 8otal annual cost @includin# holdin# cost of safety stoc/A = C1-064-45*.1 pounds at a cost of C46-666 based on a price of C6.5 See file Ch8.. c. 146-5.. 33 .1 = 5-. !$ = 186-*80 .03. Chapter 8 .7ls a.. b. and it 1ill occur in the previous inventory cycle.650 per pound. 8he optimal order <uantity is !$ = 146-5.8..

8he optimal order <uantity is !$ = 108. Chapter 8 .06 See file Ch8. b. 34 .06.8.6*3&$*30 = 1* calendar days.7ls a. 8he number of days bet1een orders = .

0003.the standard deviation of the lead time demand = √&68.0.1e 1ould estimate the variance of the lead time demand as *$35.0003 = &68.3338 = 1. c.. Since the sample mean = 8.1e 1ould estimate the mean lead time demand as *$8. = &0&. 38 . :ence.. Chapter 8 .8..06 c. Since the sample variance = 35.3338.

8he reorder point is % = &83 1hich implies a safety stoc/ = *. d. 8otal 2nventory Cost = C154-435. 35 . Chapter 8 .06 c.8. units. continued c.0&.