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40Spring 2015 OPRE3310: OPERATIONS MANAGEMENT HOMEWORK #6 Part I-Problems: 1

40Spring 2015 OPRE3310: OPERATIONS MANAGEMENT HOMEWORK #6 Part I-Problems: 1

40Spring 2015

OPRE3310: OPERATIONS MANAGEMENT

HOMEWORK #6

Part
I-Problems:
1.
Marias
Bakery has just estimated the forecast for annual flour consumption as 500,000
pounds. Bakery buys flour from a local grocery in 25-pound bags, where each bag
costs $40. The grocery charges $100 for each shipment. Marias Bakery uses a
10% opportunity cost of capital.
a)
Determine the economic order quantity.
C=
$40 K= $100 D= 500,000 / year
Opportunity
Cost= 10%
b)
What is the average number of bags on hand?
c) How many orders per year will
there be?
d) Compute the total cost of
ordering and carrying flour in a year.
e) Maria on her way to work saw
an advertisement from the supermarket saying Every day low prices: $30 for 25
lbs. flour bag and we charge $120 per shipment. Should Maria follow up the
ad and order from the supermarket instead of the local grocery? [Hint: Use cost analysis]
2. Jerald
a local plant nursery uses 100 clay pots and 900 plastic pots a month. He
purchases each clay pot from $40 and each plastic pot from $20 from a local pot
producer. Jerald pays $100 per order delivery. Monthly carrying costs per pot
estimated to be 20% and 10% for clay and plastic pots respectively.
a)
Calculate EOQ for clay and plastic pots separately.
b)
Calculate the total cost of ordering and carrying pot in a year for each type
of pot.
c) Jerald recently figured out
that there is a new ceramic coated thin clay pots from $25 in the market. He
estimated the monthly carrying costs per ceramic pot to be 20%. How much Jerald
will save if he starts using new ceramic pots for both clay and plastic pots?

40Spring 2015 OPRE3310: OPERATIONS MANAGEMENTHOMEWORK #6Part
I-Problems:1.
Marias
Bakery has just estimated the forecast for annual flour consumption as 500,000
pounds. Bakery buys flour from a local grocery in 25-pound bags, where each bag
costs $40. The grocery charges $100 for each shipment. Marias Bakery uses a
10% opportunity cost of capital.a)
Determine the economic order quantity.C=
$40 K= $100 D= 500,000 / yearOpportunity
Cost= 10% b)
What is the average number of bags on hand? c) How many orders per year will
there be? d) Compute the total cost of
ordering and carrying flour in a year.e) Maria on her way to work saw
an advertisement from the supermarket saying Every day low prices: $30 for 25
lbs. flour bag and we charge $120 per shipment. Should Maria follow up the
ad and order from the supermarket instead of the local grocery? [Hint: Use cost analysis] 2. Jerald
a local plant nursery uses 100 clay pots and 900 plastic pots a month. He
purchases each clay pot from $40 and each plastic pot from $20 from a local pot
producer. Jerald pays $100 per order delivery. Monthly carrying costs per pot
estimated to be 20% and 10% for clay and plastic pots respectively.a)
Calculate EOQ for clay and plastic pots separately.b)
Calculate the total cost of ordering and carrying pot in a year for each type
of pot.c) Jerald recently figured out
that there is a new ceramic coated thin clay pots from $25 in the market. He
estimated the monthly carrying costs per ceramic pot to be 20%. How much Jerald
will save if he starts using new ceramic pots for both clay and plastic pots?

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