Term3 Operations Management

1.

a) Nicholas is the facilities manager for Green Market Groceries. The store is remodeling and
wants to determine which brand of freezer to use for its frozen goods section. The freezers
vary by size, cabinet type, accessibility, refrigerant, and interliner. These variables affect
both the purchase cost and the operating cost (e.g., energy consumption) of each freezer.
Currently, the cost of energy per kilowatt hour (kwh) is $0.10. Green Market expenses
capital purchases over a three-year period. Given the cost and capacity data below, calculate
the “productivity” (i.e., the cubic feet of freezer space per dollar) for each freezer
alternative. Which freezer brand would you recommend to Nicholas.

Alaskan Brr Cold Deep

Seal  Frost Case Freeze 

Purchase cost $3,270  $4,000  $4,452  $5,450 

Daily energy consumption (kwh) 3.61 3.88 6.68 29.07

Cost per kwh $0.10 $0.10 $0.10 $0.10

Daily energy cost $0.36 $0.39 $0.67 $2.91

Daily purchase cost $2.99 $3.65 $4.07 $4.98

Total cost $3.35 $4.04 $4.73 $7.88

Volume (cu ft) 25 35 49 79

Productivity (cu ft/$) 7.47 8.66 10.35 10.02

Cost/cu ft $0.13 $0.12 $0.10 $0.10

b) A computer products store stocks color graphics monitors, and the daily demand is normally
distributed with a mean of 1.6 monitors and a standard deviation of 0.4 monitor. The lead
time to receive an order from the manufacturer is 15 days. Determine the reorder point that
will achieve a 98% service level

Mean = 1.6 monitors per day

Standard Deviation = 0.4 monitors per day
Lead time = 15 days
98% service level is 2.05

Reorder Point R = L+ Z0,VL

= (1.6)(15) + (2.05) (0.4)V15
= 24 + 3.18

R = 27.18 monitors
2. Design a layout on a 2x3 grid that satisfies these preferences. represent the data with the
help of a relationship matrix.

3. Given in the following table are the tasks necessary for final assembly of a hospital bed, the
length of time needed to perform each task, and the operations that must be completed
prior to subsequent operations. Construct a precedence diagram and balance the assembly
line for a desired cycle time of 14 minutes. Draw a schematic diagram of the balanced line.
How many beds can actually be assembled in an eight-hour period?

4. Given the following network and activity time estimates, determine earliest and latest
activity times, slack, the expected project completion time and variance, and the probability
that the project will be completed in 28 days or less.

 Compute the Expected Activity Times and Variances 

t=[ (a+4m+b)/6]

v= [(b-a)/6]^2

the expected time and variance for activity 1 is 

These values and the remaining expected times and variances for each activity
follow: 

Activity  t  v 
1  9  4 
2  10  1 
3  5  4/9 
 Activity  t  v 
4  3  4/9 
5  6  4/9 
6  3 
7  4  1/9 

 The earliest and latest activity times and the activity slack: 

 Identify the Critical Path and Compute Expected Project Completion Time and
Variance 

After observing the foregoing network and those activities with no slack
(i.e., S = 0), we can identify the critical path as 1   3  5   7. The
expected project completion time ( t P ) is 24 days. The variance is computed
by summing the variances for the activities in the critical path: 

 Determine the Probability That the Project Will Be Completed in 28 Days or Less 

The following normal probability distribution describes the probability analysis: 


  Compute Z by using the following formula: 

 The corresponding probability from Table A.1 in Appendix A is .4633; thus, 

P ( x   28) = .9633 

5. a) Discount Carpets manufactures Cascade carpet, which it sells in its adjoining showroom
store near the interstate. Estimated annual demand is 20,000 yards of carpet with an annual
carrying cost of $2.75 per yard. The manufacturing facility operates the same 360 days the
store is open and produces 400 yards of carpet per day. The cost of setting up the
manufacturing process for a production run is $720. Determine the optimal order size, total
inventory cost, length of time to receive an order, and maximum inventory level.

Cost of setting up process = $720

Carrying cost = $2.75 per yard
Demand D = 20000 yard
d = 20000/360
d = 55.56 yard per day

P= 400 yards per day

Optimal order size Q = 3487.4 yards

Tc min = $8258.33
Production run = Q/P
= 3487.4/400
Production run = 8.72 days per order

Maximum inventory level = Q(1-d/p)

=3287.4(1-55.56/400)
= 3003 yards

b) A manufacturing firm has been offered a particular component part it uses according to the
following discount pricing schedule provided by the supplier.

Co = $275
Cc = $14
D = 700

Optimal order Q = 165.83

TC = ((Co D) / Q) + (Cc Q)/2 + PD
= ((275)(700))/2 + ((14)(165.83))/2 + ($65)(700)
= $47821
Next, compare the order size with the second level quantity discount with an order size of 200 and
discount price of $59

Tc = ((275)(700)/200) + ((14)(200)/2) + (59)(700)

= 43662.50
The discount result in lower cost

Finally, compare the current discounted product size with the fixed-price discount for Q = 600

Tc = ((275)(700)/600) + ((14)(600)/2) + (56)(700)

=$43720.83

Since, this total cost is higher, the optimal order size is 200 with a total cost of $43662.50