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MATH3602: Operations Research Assignment #1 is due on Thursday, January 23, 2014 @ 5 pm 1. Which of the following is NOT an assumption of the EOQ model? A. Ordering cost is fixed B. Annual demand is known C. The order is received the instant it is made D. The stock is used up in a random manner 2. Which of the following is NOT true about the basic EOQ model? A. Stock-out are not permitted B. The rate of demand is not constant C. The rate of demand is constant D. The holding cost is known and is constant 3. Which of the following is NOT an assumption of the BOQ model? A. Ordering cost is constant B. Inventory is replenished instantaneously C. The stock is used up gradually D. The annual demand is known 4. In inventory control, the time which elapses between placing an order and the arrival of the inventory is called: A. mean time B. variance in time C. lead time D. cycle time 5. Which of the following is an example of order cost? A. rent B. transport C. insurance D. refrigeration 6. All the following are carrying costs EXCEPT: A. cost for shipping B. cost for handling material C. facility storage cost D. product deterioration, spoilage, breakage cost etc. 7. Which of the following is NOT correct concerning the adverse effect of the EOQ model with Quantity Discount? A. Extra stockholding costs B. Lower price per item C. Higher average stock level D. Larger order quantity 1 The following information refers to questions 8 - 12 A company’s forecasted annual demand for an input is 10,000 units which has a price $5 each. It costs the company $500 each time an order is placed and the cost of storing one unit for the year is $10. 8. Calculate the economic order quantity E.O.Q. A. 500 B. 1000 C. 5000 D. 1,0000 9. Calculate the number of order that should be made annually. A. 10 B. 15 C. 5 D. 20 10. Determine the annual ordering cost. A. 1000 B. 10,000 C. 500 D. 5000 11. Determine the average lot size inventory level. A. 100 B. 500 C. 1000 D. 250 12. Determine the annual storage cost. A. 100 B. 500 C. 5000 D. 1000 Use the following information to answer Questions 13 – 17 Islands Pure Water Ltd, a retailer of Pure Water barrels, has an annual demand of 24,000 barrels. The barrels are purchased for stock in lots of 4,000 and cost $9.60 each. Ordering and transport costs amount to $160 per order and the annual cost of holding one barrel in stock is estimated to be 96 cents. Assume that fresh supplies can be obtained immediately. 13. Calculate the Economic Order Quantity, EOQ A. 2828 B. 894 C. 693 D. 365 2 14. What is the annual holding cost? A. $332.64 B. $429.12 C. $1357.44 D. $2714.88 15. Determine the annual ordering cost. A. $10,520.55 B. $5,541.13 C. $4,295.30 D. $1,357.85 16. Calculate the total costs. A. $2,715.29 B. $4,724.42 C. $5,873.77 D. $10,853.19 17. If the company offers a 20% discount on the basic price for order quantities between 5000 and 7500, what will be the most economic quantity to order? A 7500 B. 5000 C. 2828 D. 894 18. Calculate the economic order quantity from the following information. Also find the number of orders to be placed in a year. Consumption of material per year Order place cost per order Cost per kg of raw material Storage cost 19. = = = = 10,000 kg $50 $2 8% on average inventory Suppose a company has made the necessary capital investment such that a particular input can now be manufactured by the company at a rate of 7 500 units per annum. The forecasted annual demand for the input by the company is 3 000 units. It costs the company $100 each time an order is placed and the cost of storing 1 unit for the year is $10. (a) Calculate the economic order quantity, BOQ (b) Calculate the annual storage cost. (c) Calculate the average inventory level of the input now that the company produces this input 3 20. A company uses a special bracket in the manufacture of its products which it orders from outside suppliers. The appropriate data are: Demand = 2,000 per annum Order cost = $20 per order Carrying cost = 20% of item price Basic item price = $10 per bracket The company is offered the following discounts on the basic price: For order quantities 400 – 799 less 2% 800 – 1,599 less 4% 1,600 and over less 5% Establish the most economical quantity to order. 21. An inventory system follows the adapted basic model (with gradual replenishment). The demand rate is constant at 1600 articles per year, the price per article is $1.80, the holding cost is 10% of price per year and the setup cost is $12 per run. If the production rate is 5000 articles per year, calculate: the optimum run size (EBQ), the run time, the cycle length and the average inventory level. 4