IE137 – OPERATIONS MANAGEMENT

MODULE 2 SUMMATIVE ASSESSMENT

1. (15 points) The production planning period for the flat-screen monitors an electronic manufacturing.
Regular time cost per monitor $85
Overtime cost per monitor $100
Subcontract cost per monitor $110
Back order cost $10
Carrying cost per monitor per month $5

Month 1 Month 2 Month 3 Month 4

Demand 2,000 2,500 2,300 2,100
Capacity
Regular 1,600 1,700 850 1,450
Overtime 400 400 200 400
Subcontract 600 600 600 800

The electronics manufacturing expects to enter the planning period with 500 monitors in stock. Develop
a production plan that minimizes the cost. Management wants to prioritize filling in months of demand
immediately.

2. (10 points) A 10-week planning period has projected a forecast of 50 units. Create a master production
schedule and available to promise plan using an MPS value of 80 units, and a beginning inventory of 90
units. Below is the customer order:

Week 1 2 3 4 5 6
Customer order 120 80 30 45 85 90
3. (15 points) A local bakery has the following demand forecast. Develop an aggregate plan that will satisfy
the given conditions below:

Level production must be made. Regular capacity is 650 units with allowable overtime. Overtime capacity
has a maximum limit of 150 per period. The bakery has a starting inventory of 200 units from previous
production and expects a delivery of buffer stock of 300 units on period 3. Further, the management
wants an ending inventory of 500 units at the end of period 8 to serve as buffer stock for the next period.
The management has an option to subcontract to meet demand. Subcontracting has no limit, as this will
be a job-order basis.

Period 1 2 3 4 5 6 7 8
Forecast 1,800 800 1,700 1,100 900 1,500 900 1,600

Regular cost: $10

Overtime cost: $12
Subcontract cost: $15
Inventory cost: $2
Back order: $5

Develop a plan with the minimum cost.

4. (10 points) A skincare company has a weekly order of 100 units of their retinol cream. They are considering
either producing or making the product in-house. Ordering cost is P500 per order, while setup cost for
producing the item is P450. Inventory cost for either making or buying the product is fixed at P15 per unit
per week. The company can produce 150 units per week; determine the better option for the company.

5. (10 points) A rice mill currently has a reorder point of 200 sacks of grains. The probability that demand
will change over the month is given in the table below. The rice mill projects ten orders per year, holding
cost is P400 per sack per year, and stock out cost is P250 per sack. Calculate the optimal reorder point
and the safety stock they need to keep.

Demand Probability
150 0.12
180 0.05
200 0.15
250 0.23
270 0.20
300 0.25
6. (10 points) A bookstore is considering three suppliers for 80gsm letter-size bond paper. The cost of
holding the items is 15% of the price and demand is 10 reams per week. The following shows the details
of quotation send by the suppliers. Currencies in Philippine peso.

Ordering cost Min. order to avail

Price per ream Discount
per ream discount (reams)
Maxcor 340.00 55 10% 500
PeachTree 280.00 60 8% 700
Sterling 385.00 40 12% 400