Q1.

1 110 110
2 130 116
3 150 126.2
4 170 130 40 40 139.34 30.66
5 160 150 10 10 145.538 14.462
6 180 160 20 20 155.8766 24.1234
7 140 170 -30 30 151.1136 11.11362
8 130 160 -30 30 144.7795 14.77953
9 140 150 -10 10 143.3457 3.345674
23.33333 16.41404

exp is better

Q2. The Chemical Company produces a chemical compound. The compound can be produced
at rate of 20000 pound per year. Annual demand for compound is 14000 pounds per year.
The fixed setup cost is £400, and the variable cost of production is £40 per pound. Interest
rate is 20%. What the optimal size of the production run for this particular compound? Find
total cost and number of order per year?
 CD 560000
11200000 AD/Q 2592.296
8 H 8
0.7 D/Q 0.7
HQ/2*1-
0.3 D/Q) 2592.296
2.4 K9Q0 565184.6
4666667
2160.247 NO. OF PRODUCTION SETUP 6.480741 7

Q3. Classify the items according to whether they belong in class A, B or C.

Item number Annual quantity used Unit value

1 17 2.5
2 50 17
3 15 15
4 25 17
5 5 17
6 50 119
7 153 5
8 20 2.125
9 16 2.656
10 17 2.5
 Cumulative
Cumulative item Annual usage Cumulative
Item annual usage
number ($) annual usage ($)
(%)
6 10 5950 5950 70.25
2 20 850 6800 80.28
7 30 765 7565 89.32
4 40 425 7990 94.33
3 50 225 8215 96.99
5 60 85 8300 97.99
1 70 42.5 8342.5 98.49
8 80 42.5 8385 99.00
9 90 42.5 8427.5 99.50
10 100 42.5 8470 100.00

Percentage of usage
Cathegory Items Percentage of items
(%)
Class A items 6, 2 20% 80.28 %
Class B items 7, 4, 3 30% 16.71%
Class C items 5, 1, 8, 9, 10 50% 3.01%
Q4. Assume firm has an annual demand of 5000 units. Ordering cost $49 and holding cost
20% of the price.

Quantity Price
0-999 $5.00
1000-1999 $4.80
2000 and more $4.75

a. Compute the EOQ and total cost for the optimal solution.
b. As an operations manager how are you going to use this analysis to manage your
inventory?

I=3
Q3 2*A*D/IC 490000 515789.5 718.1848
0.95
Q3 2000
c*d+AD/Q
+ ic*Q/2 23750 24822.5
122.5
950
i=2 490000 510416.7 714.4345
0.96
Q2=1000
Q*=
24000 24725 optimal 1000 K(Q*)=24725
245
480
i=1
Q1 490000 490000 700
1
Q1 700
cd+2ADic 25000 25700
490000 700

Q5. A sample of 7 different stock items from small company is selected a random. These
items vary in price and yearly demand. Classify these items according to whether they
belong in class A, class B and class C. (20)

Item number Annual Demand Unit Value

M301 75 80
M382 150,000 0.90
M387 500 3
 M764 18,000 0.20
M870 3,000 0.30
M1216 20,000 0.10
M1242 10,000 2

itm annual price

1 M382 150,000 0.9 135,000 79.88166 79.88166 79.88166 A
2 M1242 10,000 2 20,000 11.83432 91.71598 B
3 M301 75 80 6,000 3.550296 95.26627 15.38462 B
4 M764 18,000 0.2 3,600 2.130178 97.39645 C
5 M1216 20,000 0.1 2,000 1.183432 98.57988 C
6 M387 500 3 1,500 0.887574 99.46746 C
7 M870 3,000 0.3 900 0.532544 100 4.733728 C
169,000

Q6. Weekly sales of copy paper at Cubicle Suppliers are in the table below. A three-period
moving average and a exponential smoothing are provided. Compute MAD for each forecast
and then forecast week 8 with the more accurate method (either the three or exponential
smoothing moving average. What is your forecast?

Week 1 2 3 4 5 6 7
Sales (cases) 17 21 27 31 19 17 21

3MA e MAD ex. e MAD ex e MAD

17.00 17.00
1 17 0 0.000 0.000 0 0.000 0.000
17.40 17.08
2 21 0 -3.600 3.600 0 -3.920 3.920
18.36 17.27
3 27 0 -8.640 8.640 8 -9.722 9.722
- -
21.66 - 19.62 11.37 11.37 17.55 13.44 13.44
4 31 7 9.333 9.333 4 6 6 3 7 7
26.33 19.56 17.58
5 19 3 7.333 7.333 2 0.562 0.562 2 -1.418 1.418
25.66 19.30 17.57
6 17 7 8.667 8.667 5 2.305 2.305 0 0.570 0.570
22.33 19.47 17.63
7 21 3 1.333 1.333 5 -1.525 1.525 9 -3.361 3.361
 19.00 19.47 17.47
8 0 6.667 5 4.001 5 4.634

Q7. The manager of an estate agent would like to determine the price for houses. The house
price is shown in table below.

House Price in Square Feet House Price in Square Feet

$1000s $1000s
245 1400 219 1550

312 1600 405 2350

279 1700 324 2450

308 1875 319 1425

199 1100 255 1700

Draw a trend line by eye for these data. Use simple regression model to forecast the house
price for year 1000 and 2000 square feet.

y x xy x2

245000 1400 3.43E+08 1960000

312000 1600 4.99E+08 2560000
279000 1700 4.74E+08 2890000
308000 1875 5.78E+08 3515625
199000 1100 2.19E+08 1210000
219000 1550 3.39E+08 2402500
405000 2350 9.52E+08 5522500
324000 2450 7.94E+08 6002500
319000 1425 4.55E+08 2030625
255000 1700 4.34E+08 2890000
2865000 17150 5.09E+09 30983750
286500 1715

b 5.086E+10
Q8. (a) Determine initial values of the slope, intercept and seasonal factors for current period
based on the observations given in table below using winters’s method. Forecast for each
season for current year.

(b) Suppose the observed demand for first season was 112. Using  = 0.2,  = 0.1,  =
0.1, updated the estimates of the series, the slope and the seasonal factors. (25)

Period 1 Demand Period 2 Demand

1 72 1 83
2 107 2 121
3 55 3 63
4 88 4 100
Q9. . Manufacturer of hard disks for personal computers has sold the following numbers of
disks for 8 years:

Number of
Year
sold (in 000s)
1 0.2
2 4.3
3 8.8
4 18.6
Number of
Year
sold (in 000s)
5 34.5
6 68.2
7 85.0
8 58.0

(a) Compute the three-year moving average forecast and compute the forecast error for
each year.
(b) Compute exponential smoothing with smoothing constant 0.1.

Which method moving average or exponential smoothing was more accurate for these data?
Use the best method to predict the next period (year 9).

Number
of sold
(in
Year 000s) 3 e e e^2 exp e e
1 0.2 0.2 0.2 0 0
2 4.3 4.3 0.61 -3.69 3.69
3 8.8 8.8 1.429 -7.371 7.371
-
4 18.6 18.6 4.433333 -14.1667 14.16667 200.6944444 3.1461 15.4539 15.4539
-
5 34.5 34.5 10.56667 -23.9333 23.93333 572.8044444 6.28149 28.2185 28.21851
-
6 68.2 68.2 20.63333 -47.5667 47.56667 2262.587778 12.47334 55.7267 55.72666
7 85 85 40.43333 -44.5667 44.56667 1986.187778 19.72601 -65.274 65.27399
-
8 58 58 62.56667 4.566667 4.566667 20.85444444 23.55341 34.4466 34.44659
134.8 5043.128889 65.18034 -199.12 199.1197
26.96 1008.625778 39.82393

Q10. (a) The data from Table below are shown number of patrons using the park since its
opening in July 2021. Use linear regression to predict number of patrons for Jan. to
March 2022.
 Month # Visitors Month # Visitors
July 133 October 640
August 183 November 1875
September 285 December 2550

(b) Predict number of patrons for Jan. to March 2022 for data in (a) using double
exponential smoothing with  = 0.2,  = 0.1.

h d h*d h^2 h h*d h^2

1 133 133 1 7 931 49
2 183 366 4 8 1464 64
3 285 855 9 9 2565 81
4 640 2560 16 10 6400 100
5 1875 9375 25 11 20625 121
6 2550 15300 36 12 30600 144
21 5666 28589 91 57 62585 559
3.5 944.333 2 2 9.5
4 4
n*sum(h*d) 171534 375510
sumh*sumd 118986 322962 52548 52548 2 2
-
n*sumh^2 546 3354 500.4571 b 807.267
-
(sumh)^2 441 3249 105 105 500.4571 3810.01

d= a+bh 1
-
7 2695.933 1 3309.55
8 3196.39 1 -2809.1
-
9 3696.848 1 2308.64

double

d1 200.3333333 1 2.5 1240

d2 1688.333333 1
d2-d1/3 496 B6 2
D 944.3333333 1
S6 2184.333333 2
F7 2680.333333 1 1
 F8 3176.333333 2 1
F9 3672.333333 3 1

Q11. Utilizing classification theory, classify the items according to whether they belong in class
A, class B or class C. (20)

Item No. Forecasted Annual Requirements Item Unit Cost ($)

M1 3000 0.20
M2 3 1350
M3 200 10
M4 500 20
M5 50 1200
M6 1000 0.50
M7 1700 0.45

Item No. Forecasted Annual Requirements Item Unit Cost ($) total cost
M1 3000 0.2 600
M2 3 1350 4050
M3 200 10 2000
M4 500 20 10000
M5 50 1200 60000
M6 1000 0.5 500
M7 1700 0.45 765
77915
Item
No. total cost cum %
M5 1 14.29 60000 60000 77.01
M4 2 28.57 10000 70000 89.84 A
M2 3 42.86 4050 74050 95.04 5.20 5.20
M3 4 57.14 2000 76050 97.61 7.76
M7 5 71.43 765 76815 98.59 8.75
M1 6 85.71 600 77415 99.36 9.52
M6 7 100.00 500 77915 100.00 10.16 71.43
77915

% of no. of
% usage
item
Class A 5,4 89.84 28.57
Class B 2, 3, 7, 1, 6 10.16 71.43
Class C 0 0
Q12. Consider an inventory system where discount are given for large ordered quantities. The
price schedule is shown in Table below. The order cost is $40 per order. The inventory carrying
cost is $2 per unit per year and the annual demand is 5000 units. Determine the optimum order
quantity.

Order Size Unit cost ($)

Q 1000 10
1000 Q  2000 9
2000 Q  3500 8
3500 Q 7.5

Order Size Unit cost ($)

Q 1000 10
1000 Q  2000 9
2000 Q  3500 8
3500 Q 7.5

q=0 k= ∞ j=4

Q4 447.2135955 400000
1000 200000
k(q4) 41057.14286

q3 447.2135955
2000
k(q3) 42100

EOQ 3500 at total cost 41057.14

Q13. Using ABC analysis, which of these should be classified as A, B and C items?

ITEM UNIT COST ANNUAL USAGE

F-101 1.50 100,000
F-106 200.00 5,000
F-112 100.00 200
F-115 2.00 30,000
F-119 8.00 500
F-122 19.00 1,000
F-125 3.00 60,000
F-130 10.00 1,000
 UNIT ANNUAL total
ITEM COST USAGE cost
F-106 12.5 200 5,000 1000000 69.30007 69.30007 A
F-125 25 3 60,000 180000 12.47401 81.77408 81.77408 A 25
F-101 37.5 1.5 100,000 150000 10.39501 92.16909 B
F-115 50 2 30,000 60000 4.158004 96.3271 B
F-112 62.5 100 200 20000 1.386001 97.7131 15.93902 B 38
F-122 75 19 1,000 19000 1.316701 99.0298 c
F-130 87.5 10 1,000 10000 0.693001 99.7228 c
F-119 100 8 500 4000 0.2772 100 2.286902 c 38
1443000

Q14. The maintenance department of a large hospital uses about 816 cases of liquid cleanser annually.
Ordering costs are £12, carrying costs are 0.2 per year, and the new price schedule indicates as shown
in table below Determine the optimal order quantity and the total cost. (30)

Quantity (Cases) Discount price (£)

0  Q 50 20
50  Q 80 10% from original price
80  Q 100 15% from original price
100  Q ∞ 20% from original price

19584
97920
312.9217
q c d a h cd ad/q hq/2 k(q) 2adh k(q)
1 312.92 16 816 12 0.2 13056 31.292 31.292 13119 3916.8 16973 optima
2 80 17 816 12 0.2 13872 122.4 8 14002 3916.8 17789

Q15. The Centerville Water Department provides water for the entire town and outlying areas.
The number of acre-feet of water consumed in each of the four seasons of the three preceding
years is shown below.

a. Determine the seasonal factors for the four seasons. (10)

b. After considering seasonal effects, use these values to forecast water consumption in
next year. (15)

Season Year 1 Year 2 Year 3

 Winter 25 27 24
Spring 47 46 49
Summer 68 72 70
Fall 42 39 44

Season Year 1 Year 2 Year 3

Winter 25 27 24 0.234375 45.26563 45.76563 46.
Spring 47 46 49 0.078125 45.42188 45.92188 46.
Summer 68 72 70 -0.07813 45.57813 46.07813 46.
Fall 42 39 44 -0.23438 45.73438 46.23438 46.

V 45.5 46 46.75
1.25
8
G0 0.15625
0.46875
S0 47.21875
C
1 0.552295 0.589962 0.515956 0.552738 0.553096
2 1.034744 1.001701 1.049883 1.028776 1.029442
3 1.491944 1.562564 1.494828 1.516445 1.517427
4 0.918346 0.843528 0.936482 0.899452 0.900035
3.997411 4 ft+k

f0,1 26.20292
f0,2 48.93068
f0,3 72.36232
f0,4 43.06103

Q16. Suppose the director of an emergency care facility has recorded the number of patients
who have arrived at the facility over the last 15 weeks. This demand time series is shown in
Table below.
NUMBER OF NUMBER OF
WEEK WEEK
PATIENTS PATIENTS
1 84 9 127
2 81 10 103
3 89 11 96
4 90 12 96
5 99 13 86
6 106 14 101
7 127 15 109
8 117
a. Develop a three-period moving average forecast for periods 11 through 16 (10).
 b. Develop an exponential smoothing forecast ( = 0.25) for periods 11 through 16.
Assume your forecast for period 10 was 110 (10).
c. Which model appears to work better? Why? (10)

3MA e │e│ e^2 exp. 0.25 e │e│ e^2

1 84
2 81
3 89
4 90
5 99
6 106
7 127
8 117
9 127
10 103 110
11 96 115.67 -19.67 19.67 386.78 106.50 -10.50 10.50 110.25
12 96 108.67 -12.67 12.67 160.44 103.88 -7.88 7.88 62.01563
13 86 98.33 -12.33 12.33 152.11 99.41 -13.41 13.41 179.7275
14 101 92.67 8.33 8.33 69.44 99.80 1.20 1.20 1.428772
15 109 94.33 14.67 14.67 215.11 102.10 6.90 6.90 47.5615
16 98.67 76.58
98.67 13.53 196.78 102.10 7.97 80.20
MAD 13.53 7.97
MSE 196.78 80.2

Q17. . Use a 5 month moving average to forecast demand for the first six months of year 2 for
data given in Table below (20).
year Month Demand (units) year Month Demand (units)
1 100 9 135
2 120 10 145
1
3 140 11 160
4 160 12 200
1
5 155 1 210
6 150 2 2 230
7 145 3 250
8 140

Demand
year Month 5MA
(units)
1 100
2 120
1 3 140
4 160
5 155
 6 150
7 145
8 140
9 135
10 145
11 160
12 200
1 210 168.33
2 230 190.00
3 250 213.33
2
4 230.00
5 240.00
6 250.00

18. Determine the order quantities for the following lumpy demands using A
Wagner-Whitin. Ordering cost = $90 per order, holding cost = $1.20 per unit
per week. There is no lead time and no stock-out. Only full week
requirement is ordered.
Week 1 2 3 4
Demand 23 19 32 28

start with week 3

op.1 order 32 at 3 and 28 at 4
cost 180
order
op.2 32+28 60
best
cost 123.6 option

start with week 2

op. 1 order 19 at 2 + best from 3
cost 213.6
op.2 order 51 2+3 and 28 4
cost 218.4
op.3 order 79 2+3+4
best
cost 195.6 option

start with week 1

op.1 order 23 at 1 + best 2
 cost 285.6
op.2 order 42 1+2 + best 3
best
cost 236.4 option
op.3 order 74 at 1+2+3 +best 4
cost 279.6
op.4 order 102 1+2+3+4
cost 290.4

19. Twelve- week demand forecasts are given in the following table:
Week 1 2 3 4 5 6 7 8 9 10 11 12
Demand 120 80 - 40 - - 75 85 - 60 - 90

It costs $60 to place an order, the cost of one unit is $10, and inventory
holding cost is 20 percent. Determine total ordering cost, total holding
(carrying) cost and total cost for fixed quantity Q =150?
Week 1 2 3 4 5 6 7 8 9 10 11 12 tota
start inv. 0 100 30 0 80 0 155 55 0 65 0 45
replenshment 150 170 165 125 125 735
Demand 50 70 30 90 80 10 100 55 60 65 80 45 735
end inv. 100 30 0 80 0 155 55 0 65 0 45 0 530
holding cost 1060
ordering cost 300
total cost 1360

Q20. Three items are produced in a small fabrication shop. The shop management has
established the requirement that the shop never have more than $30,000 invested in the
inventory of three items at one time. The management uses a 25 percent to compute holding
cost. Relevant cost and demand parameters are given in table below. What lot sizes should the
shop be produced so that don not exceed the budget?

Items
1 2 3
Demand rate 1850 1150 800
Production cost 50 350 85
Setup cost 100 150 50

product Product Product

1 2 3
 Annual
demand 1850 1150 800

Unit
purchasing
cost ($) 50 350 85
Holding
cost
percentage
(%) 0.25 0.25 0.25
Product
order cost
($) 100 150 50
2AD 370000 345000 80000
ic 12.5 87.5 21.25
29600 3942.857 3764.706 35794.95 0.838107
Q 172.0465 62.79217 61.3572
144.1934 52.62657 51.4239 144.1934
7209.67 18419.3 4371.032 30000

Q21. . Three items are produced in a small fabrication shop. The shop management has
established the requirement that the shop never have more than $10,000 invested in the
inventory of three items at one time. The management uses a 20 percent to compute holding
cost. Relevant cost and demand parameters are given in table below. What lot sizes should the
shop be produced so that don not exceed the budget?

Items
1 2 3
Demand rate 10000 3000 4000 500
Production cost 400 300 200 900
Setup cost 1000 1000 1000 1000

product Product Product Product

1 2 3 4
Annual
demand 10000 3000 4000 500

Unit
purchasing
cost ($) 400 300 200 900
Holding
cost
percentage
(%) 0.2 0.2 0.2 0.2
Product
order cost
($) 1000 1000 1000 1000
2AD 20000000 6000000 8000000 1000000
ic 80 60 40 180
250000 100000 200000 5555.556 451393.1 0.022154
Q 500 316.2278 447.2136 74.5356
11.07682 7.005596 9.907409 1.651235
4430.728 2101.679 1981.482 1486.111 10000