Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 6, Problem 64P
Summary Introduction
To determine: The way to minimize the purchasing cost.
Introduction: The variation between the present value of the
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
1-16 Ray Bond sells handcrafted yard decorations at county fairs.
The variable cost to make these is $20 each, and he sells them for
$50. The cost to rent a booth at the fair is $150. How many of
these must Ray sell to break even?
1-17 Ray Bond, from Problem 1-16, is trying to find a new supplier
that will reduce his variable cost of production to $15 per unit. If
he was able to succeed in reducing this cost, what would the
break-even point be?
A manufacturer has a production facility that requires 15,604 units of component JY21 per year.
Following a long-term contract, the manufacturer purchases component JY21 from a supplier with a
lead time of 7 days. The unit purchase cost is $25.6 per unit. The cost to place and process an order
from the supplier is $121 per order. The unit inventory carrying cost per year is 10.5 percent of the
unit purchase cost. The manufacturer operates 250 days a year. Assume EOQ model is appropriate. If
the manufacturer uses a constant order quantity of 2,640 units per order, what is the annual holding
cost?
Use at least 4 decimal places.
The Delta company uses three raw materials to make cakes. Delta is
trying to reduce warehousing costs and establishes three policies to that
end:
i) The annual number of orders for all products must be at least 20 per
contractual terms with transportation providers.
ii) The average inventory in units must be a maximum of 1800.
iii) Because the raw material is perishable, there can never be more than
2000 units in inventory of raw material 1. Raw material 2 has a
maximum allowed of 1200 units and the raw material 3 can store
maximum 400 units. The following table shows the product information:
Materia Demanda
Costos por unidad
Costo por
prima
(u/año)
ordenar ($)
2200
2
300
2
500
4
650
3
3000
10
100
Consider an interest rate of 10% per year.
A) Formulate the problem as a mathematical programming model
that minimizes the total annual cost.
b) Represent the problem in a single equation including the
constraints in terms of lambda
c) Find the optimized batch sizes for the company's raw…
Chapter 6 Solutions
Practical Management Science
Ch. 6.3 - Prob. 1PCh. 6.3 - Prob. 2PCh. 6.3 - Solve Problem 1 with the extra assumption that the...Ch. 6.3 - Prob. 4PCh. 6.3 - Prob. 5PCh. 6.3 - Prob. 6PCh. 6.3 - Prob. 7PCh. 6.3 - Prob. 8PCh. 6.3 - Prob. 9PCh. 6.3 - Prob. 10P
Ch. 6.4 - Prob. 11PCh. 6.4 - Prob. 12PCh. 6.4 - Prob. 13PCh. 6.4 - Prob. 14PCh. 6.4 - Prob. 15PCh. 6.4 - Prob. 16PCh. 6.4 - Prob. 17PCh. 6.4 - Prob. 18PCh. 6.4 - Prob. 19PCh. 6.4 - Prob. 20PCh. 6.4 - Prob. 21PCh. 6.4 - Prob. 22PCh. 6.4 - Prob. 23PCh. 6.5 - Prob. 24PCh. 6.5 - Prob. 25PCh. 6.5 - Prob. 26PCh. 6.5 - Prob. 28PCh. 6.5 - Prob. 29PCh. 6.5 - Prob. 30PCh. 6.5 - In the optimal solution to the Green Grass...Ch. 6.5 - Prob. 32PCh. 6.5 - Prob. 33PCh. 6.5 - Prob. 34PCh. 6.5 - Prob. 35PCh. 6.6 - Prob. 36PCh. 6.6 - Prob. 37PCh. 6.6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 54PCh. 6 - Prob. 55PCh. 6 - Prob. 56PCh. 6 - Prob. 57PCh. 6 - Prob. 58PCh. 6 - Prob. 59PCh. 6 - Prob. 60PCh. 6 - Prob. 61PCh. 6 - Prob. 62PCh. 6 - Prob. 63PCh. 6 - Prob. 64PCh. 6 - Prob. 65PCh. 6 - Prob. 66PCh. 6 - Prob. 67PCh. 6 - Prob. 68PCh. 6 - Prob. 69PCh. 6 - Prob. 70PCh. 6 - Prob. 71PCh. 6 - Prob. 72PCh. 6 - Prob. 73PCh. 6 - Prob. 74PCh. 6 - Prob. 75PCh. 6 - Prob. 76PCh. 6 - Prob. 77PCh. 6 - Prob. 78PCh. 6 - Prob. 79PCh. 6 - Prob. 80PCh. 6 - Prob. 81PCh. 6 - Prob. 82PCh. 6 - Prob. 83PCh. 6 - Prob. 84PCh. 6 - Prob. 85PCh. 6 - Prob. 86PCh. 6 - Prob. 87PCh. 6 - Prob. 88PCh. 6 - Prob. 89PCh. 6 - Prob. 90PCh. 6 - Prob. 91PCh. 6 - Prob. 92PCh. 6 - This problem is based on Motorolas online method...Ch. 6 - Prob. 94PCh. 6 - Prob. 95PCh. 6 - Prob. 96PCh. 6 - Prob. 97PCh. 6 - Prob. 98PCh. 6 - Prob. 99PCh. 6 - Prob. 100PCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3.1CCh. 6 - Prob. 3.2CCh. 6 - Prob. 3.3CCh. 6 - Prob. 3.4CCh. 6 - Prob. 3.5CCh. 6 - Prob. 3.6C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.arrow_forwardThe Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon spawn during a 24-hour period and must be canned immediately. Tinkan has the following agreement with the salmon industry. The company can deliver as many cans as it chooses. Then the salmon are caught. For each can by which Tinkan falls short of the salmon industrys needs, the company pays the industry a 2 penalty. Cans cost Tinkan 1 to produce and are sold by Tinkan for 2 per can. If any cans are left over, they are returned to Tinkan and the company reimburses the industry 2 for each extra can. These extra cans are put in storage for next year. Each year a can is held in storage, a carrying cost equal to 20% of the cans production cost is incurred. It is well known that the number of salmon harvested during a year is strongly related to the number of salmon harvested the previous year. In fact, using past data, Tinkan estimates that the harvest size in year t, Ht (measured in the number of cans required), is related to the harvest size in the previous year, Ht1, by the equation Ht = Ht1et where et is normally distributed with mean 1.02 and standard deviation 0.10. Tinkan plans to use the following production strategy. For some value of x, it produces enough cans at the beginning of year t to bring its inventory up to x+Ht, where Ht is the predicted harvest size in year t. Then it delivers these cans to the salmon industry. For example, if it uses x = 100,000, the predicted harvest size is 500,000 cans, and 80,000 cans are already in inventory, then Tinkan produces and delivers 520,000 cans. Given that the harvest size for the previous year was 550,000 cans, use simulation to help Tinkan develop a production strategy that maximizes its expected profit over the next 20 years. Assume that the company begins year 1 with an initial inventory of 300,000 cans.arrow_forwardLaredo Leather Company’s production manager, Jack Murray, has been under pressure from the company president to reduce the cost of conversion. In spite of several attempts to reduce conversion costs, they have remained more or less constant. Now Murray is faced with an upcoming meeting with the company president, at which he will have to explain why he has failed to reduce conversion costs. Murray has approached his friend, Jeff Daley, who is the corporate controller, with the following request: “Jeff, I’m under pressure to reduce costs in the production process. There is no way to reduce material cost, so I’ve got to get the conversion costs down. If I can show just a little progress in next week’s meeting with the president, then I can buy a little time to try some other cost-cutting measures I’ve been considering. I want you to do me a favor. If we raise the estimate of the percentage of completion of October’s inventory to 60 percent, that will increase the number of equivalent…arrow_forward
- A Las Vegas, Nevada, manufacturer has the option to make or buy one of its component parts. The annual requirement is 20,000 units. A supplier is able to supply the parts for $10 per piece. The firm estimates that it costs $600 to prepare the contract with the supplier. To make the parts in-house, the firm must invest $50,000 in capital equipment, and the firm estimates that it costs $8 per piece to make the parts in-house. Assuming that cost is the only criterion, use breakeven analysis to determine whether the firm should make or buy the item. 1. What is the breakeven quantity? 2. Should the manufacturer Make or Buy? 3. What is the cost savings using your decision in number 2 (above)? Show the total cost for each scenario then the savings amount.arrow_forwardBoston Company use a special part in manufacturing of its finished products. The unit cost thisspecial part is $ 35, and details of its manufacturing cost is as follows. The $35 unit productcost of this part is based on average 25,000 number of parts produced each year.An outside supplier has offered to supply the 25,000 parts at a cost of $30 per part. The specialequipment used to manufacture the above part. This equipment can only be used formanufacturing of this part and if not used it has no resale value.The total amount of general factory overhead, which is allocated based on direct labor-hours,would be unaffected by this decision because it is fixed cost..Suggest the management whether to stop producing internally and buy them from theoutside supplier?Description CAD Direct Materials 10Direct Labor 6Variable overheads…arrow_forward) O'Donnell & Joyce purchases components from three suppliers. Components purchased from Supplier A are priced at €7 each and used at the rate of 18,000 units per month. Components purchased from Supplier B are priced at €5 each and are used at the rate of 4,500 units per month. Components purchased from Supplier C are priced at €9 each and used at the rate of 1000 units per month. Currently, O'Donnell & Joyce purchases a separate truckload from each supplier. As part of its JIT drive, O'Donnell & Joyce has decided to aggregate purchases from the three suppliers. The trucking company charges a fixed cost of €550 for the truck with an additional charge of €120 for each stop. Thus, if O'Donnell & Joyce asks for a pickup from only one supplier, it charges €670; from two suppliers, it charges €790; and from three suppliers, it charges €910. What replenishment strategy would you suggest for O'Donnell & Joyce to minimize annual costs? Assume an annual holding cost of 25…arrow_forward
- Flag Faber Manufacturing inc of st paul purchases 9,649 top of the line semiconductor; the maximum backordering quantity in units 502; lead time = 1.5 month ( the firm operates 12 months per year). If the firms customer do not object to backordering and each unit backordered costs $4/year, then: what is the longest delay time in months?arrow_forwardSuppose we schedule shipments to our customers so that we expect each shipment to wait for two days in finished goods inventory (in essence we add two days to when we expect to be able to ship). We do this as protection against system variability to ensure a high on-time delivery service. If we ship approximately 2,000 units each day, how many units do we expect to have in finished goods inventory after allowing this extra time? If the items are valued at $4.50 each, what is the expected value of this inventory?arrow_forwardThe Tubular Ride Boogie Board Company has manufacturing plants in Tucson, Arizona and Toronto, Ontario. You have been given the job of coordinating distribution of the latest model, the Gladiator, to outlets in Honolulu and Venice Beach. The Tucson plant, when operating at full capacity, can manufacture 620 Gladiator boards per week, while the Toronto plant, beset by labor disputes, can produce only 410 boards per week. The outlet in Honolulu orders 500 Gladiator boards per week, while Venice Beach orders 530 boards per week. Transportation costs are as follows. Tucson to Honolulu: $10 per board; Tucson to Venice Beach: $5 per board. Toronto to Honolulu: $20 per board; Toronto to Venice Beach: $10 per board. (a) Assuming that you wish to fill all orders and ensure full capacity production at both plants, is it possible to meet a total transportation budget of $9,900? O Yes O No If so, how many Gladiator boards are shipped from each manufacturing plant to each distribution outlet? (If…arrow_forward
- A manufacturer of exercise equipment purchases the pulley section of the equipment from a supplier who lists these prices: less than 1,000, $5 each; 1,000 to 3,999, $4.95 each; 4,000 to 5,999,$4.90 each; and 6,000 or more, $4.85 each. Ordering costs are $50, annual carrying costs per unitare 40 percent of purchase cost, and annual usage is 4,900 pulleys. Determine an order quantitythat will minimize total cost.arrow_forwardNeed new ansarrow_forwardThe Great North Supermarket stocks Munchkin Cookies. Demand for Munchkins is 5000 boxes per year (365 days). It costs the store $60 per order of Munchkins, and it costs $0.70 per box per year to keep the cookies in stock. Once an order for Munchkins is placed, it takes four days to reveive the order from a food distributor. Determine the following: a. Optimal order size (EOQ) b.Minimum total annual inventoy cost c. Reorder point (R) d. Number of orders e. Time between ordersarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,