OTM 745- Supply Chain management Assignment

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Question 1:
The Crestview Printing Company prints a particularly popular Christmas card once a year and distributes the cards
to stationery and gift shops throughout the United States. It costs Crestview 50 cents to print each card, and the
company receives 65 cents for each card sold.
Because the cards have the current year printed on them, those cards that are not sold are generally are went to
recycling plant which pays 5 cents per card. The demand during last 10 years is as follows:
1 2 3 4 5 6 7 8 9 10
40,000 42,000 38,000 37,000 44,000 42,000 39,000 34,000 38,000 43,000

Determine the number of cards that Crestview should print this year.

Question 2:
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central
inventory operation. Thomas’s fastest-moving inventory item has a demand of 6,000 units per year. The cost of
each unit is $100, and the inventory carrying cost is $10 per unit per year. The average ordering cost is $30 per
order. It takes about 5 days for an order to arrive, and the demand for 1 week is 120 units. (This is a corporate
operation, and there are 250 working days per year.
a. What is the EOQ?
b. What is the average inventory if the EOQ is used?
c. What is the optimal number of orders per year?
d. What is the optimal number of days in between any two orders?
e. What is the annual cost of ordering and holding inventory?
f. What is the total annual inventory cost?

Question 3:
Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company
operates its production facility 300 days per year. It has orders for about 12,000 flashing lights per year and
has the capability of producing 100 per day. Setting up the light production costs $50. The cost of each light is
$1. The holding cost is $0.10 per light per year.
a) What is the optimal size of the production run?
b) What is the average holding cost per year?
c) What is the average setup cost per year?
d) What is the total cost per year,

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 OTM 745- Supply Chain management Assignment
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Question 4:
Bell Computers purchases integrated chips at $350 per chip. The holding cost is $35 per unit per year, the ordering
cost is $120 per order, and sales are steady, at 400 per month. The company’s supplier, Rich Blue Chip
Manufacturing, Inc., decides to offer price concessions in order to attract larger orders. The price structure is shown
below.

QUANTITY PURCHASED PRICE/UNIT

1–99 units $350
100–199 units $325
200 or more units $300

a. What is the optimal order quantity and the minimum annual cost for Bell Computers to order, purchase,
and hold these integrated chips?
b. Bell Computers wishes to use a 10% holding cost rather than the fixed $35 holding cost in (a). What is the
optimal order quantity, and what is the optimal annual cost?

Question 5:
Find the re-order point for product whose daily demand is 50 and lead time is three days. His demand pattern
during the last 10 re-order periods is as follows:

Demand during lead time

1 2 3 4 5 6 7 8 9 10
147 155 130 152 138 163 148 156 160 143

He wants to have a re-order point that guarantees that stockout will not happen 97% of the time.

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