East West University

Department of Business Administration

Fall 2021
MGT 337 – Production Operations Management
Final Examination

Time: 80 minutes Marks: 20

Answer ALL the questions

4
1. Use the bill of materials and inventory records to determine the quantity of purchased
items necessary to assemble 100 end items if the manufacturer uses lot-for-lot ordering.
There are no end items currently on hand.

Component On-hand Component On-hand

A 20 E 50
B 20 F 30
C 50 G 50
D 200

END ITEM
(W)

B (2)
A (1) C (4)

E (2) F (1)

D (2) E (1) D (3) G (2)

D (1)
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2. Your company has compiled the following data on the small set of products that
comprise the specialty repair parts division. Perform ABC analysis on the data.

Item Annual Usage (US$)

1 42.5
2 850
3 225
4 425
5 85
6 5950
7 765
8 42.5
9 42.5
10 42.5
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3. Complete the following MRP matrix.

Item: X
Lot size: Fixed Order Quantity (FOQ) - 500
Safety Stock: 80 units
Lead time: 2 weeks
Period 1 2 3 4 5 6 7 8 9 10
Gross 130 160 120 260 130 120 185 115 125
requirements
Scheduled
receipt
On hand (370)
Net
requirements
Planned order
receipts
Planned order
release
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4. Comptek Computers wants to reduce a large stock of personal computers it is

discontinuing. It has offered the University Bookstore at Tech a quantity discount
pricing schedule if the store will purchase the personal computers in volume, as
follows:

Quantity Price
0-49 $1,400

50-89 1,100

90+ 900

The ordering cost is $2,500, and annual demand for this particular model is estimated to be
200 units. The annual carrying cost for a computer at the University Bookstore is 15% of
the purchase price. Determine the optimal order size.

5. ABC Corporation is trying to decide between two alternate Order Plans for its inventory
of a certain item. Irrespective of the plan to be followed, demand for the item is expected
to be 1,000 units annually. Under Plan 1st, Midwest would use a teletype for ordering;
order costs would be Rs. 40 per order. Inventory holding costs (carrying cost) would be
Rs. 100 per unit per annum. Under Plan 2nd order costs would be Rs. 30 per order. And
holding costs would 20% and unit Cost is Rs. 480. Find out EOQ and Total Inventory
Cost than decide which Plan would result in the lowest total inventory cost?