BRAC BUSINESS SCHOOL

Course name: Operations Management

Course code: MSC301

Section: 03

Submitted To:

Md. Hasan Maksud Chowdhury

Assistant Professor

BRAC University

Submitted by

TamimZahed

ID: 17304147

DATE OF SUBMISSION: 30/08/2020

Contents
Answer to the question no 2.......................................................................................................................2
Answer to the Question No: 4.....................................................................................................................3
Answer to question no 6.............................................................................................................................4
Answer to the question no 7.......................................................................................................................4
Answer to the question no. 8......................................................................................................................7
Answer to the question no 20.....................................................................................................................9
Answer to the question no 23.....................................................................................................................9
Answer to the question no 24...................................................................................................................10
Answer to the question no 26...................................................................................................................11
Answer to the question no 29...................................................................................................................12
Answer to the question no 30...................................................................................................................13

Page | 1
Answer to the question no 2

a)

Item Unit Cost Usage Amount Cost% Cumulative Classification

F95 30 800 24000 25.5 25.5 A
Z45 80 200 16000 17 42.5 A
K35 25 600 15000 15.9 58.4 A
P05 16 500 8000 8.5 66.9 A
F14 20 300 6000 6.4 73.3 A
D45 10 550 5500 5.8 79.1 A
K36 36 150 5400 5.7 84.9 B
D57 40 120 4800 5.1 90 B
K34 10 200 2000 2.1 92.1 B
D52 15 110 1650 1.8 93.9 C
M20 20 80 1600 1.7 95.6 C
F99 20 60 1200 1.3 96.8 C
N08 30 40 1200 1.3 98.1 C
D48 12 90 1080 1.1 99.3 C
M10 16 25 400 0.4 99.7 C
P09 10 30 300 0.3 100 C
94130

b) The managers can find out the demand for each category. Demand and stock increases
simultaneously. The category A brings more profit, that is why the managers will negotiate with
their suppliers more. This helps them to figure out which customer will choose which category

c) Considering the demand figures, the manager may think of putting p05 on A category.

Answer to the Question No: 4

(a) D= 40 x 260
10400 boxes

Page | 2
 S= $60
H=$30

Qo =√2𝐷𝑆/𝐻
= (√2*10400*60) / 30
=203.96 boxes

(b) Total Cost = Carrying cost + Ordering Cost

Total Cost = (Q/2)*H + (D/Q)*S

= (204/2)*30 + (10400/204)*60
= $6,118.82

Yes, annual ordering and carrying costs always equal at the EOQ.

(c) Q=200
Total Cost (200): (Q/2)*H + (D/Q)*S
=(200/2)*30 + (10400/200)*60
=$6,120

$6120-$6118.82 = $1.18 higher every year for Q=200

This is an acceptable rate

Answer to question no 6

D = 12 * 800 = 9600
H = 0.35 (35 /100) * 10 = $3.5 crate per year
S = 28$

Page | 3
 Total Cost = (Q/2) * H + (D/Q) *S = 1736

2∗9600∗28
√
Qo= = 3.5

= 391.96

Total Cost = (Q/2) *H + (D/Q) *S

=1371.714264

Savings per year using EOQ is 364.29

Answer to the question no 7

(a)
First 6 month period

d= 600/6 = 100

100 &H = 2 per month

Qo = 2 dS = 2∗100∗55
√ √
H 2

= 74.16 units

Second 6 month period

D= 900/6

Page | 4
 =150

150&H = 2 per unit per month

Qo= 2 dS = 2∗150∗55
√ √
H 2

= 90.83 units

(b) EOQ can only be used when demand is constant.

(c)First 6 month period

d= 600/6
=100
H= 2 units per month
S= 55
EOQ= 74

Total Cost (74): (Q/2)*H + (d/Q)*S

= (74/2)* 2 + (100/74)*55
= $148.32

Discount including = $10.

S= $55 - $10 = $45

Total cost (50): (Q/2) *H + (d/Q) *S

= (50/2) * 2 + (100/50) *45
= $140

Page | 5
 Total Cost (100): (Q/2)*H + (d/Q)*S
= (100/2)*2 + (100/100)*45
= $145

Total Cost (150): (Q/2) * H + (d/Q) *S

= (150/2)*2 + (100/150)*45
= $180

Second 6 month period

d= 900/6
=150
H= 2 unit per month
S=$55
EOQ= 91

Total Cost (91): (Q/2)*H + (d/Q)*S

= (91/2)*2 + (150/91)*55
= $181.66

Discount including = $10.

S= $55 - $10 = $45

Total Cost( 50): (Q/2)*H + (d/Q)*S

= (50/2)*2 + (150/50)*45
= $185

Total Cost (100): (Q/2)*H + (d/Q)*S

= (100/2)*2 + (150/100)*45
= $167.50

Page | 6
 Total Cost (150): (Q/2)*H + (d/Q)*S
= (150/2)*2 + (150/150)*45
= $195

Yes, the manager should take advantage of the offer.

Answer to the question no. 8

Given that,

D= 27000 jars per month

H= $.18 per jar per month

S= $60

Company operates 20 days a month

Current Q= 4000

a)

Step 1,

Current monthly cost Q=4000

Q d 4000 27000
TC= ( ) H + ( ) s = ( ).18 + ( ) 60 = $360+$405 =$ 765
2 Q 2 4000

Step2:

2 ds 2( 27000)60
Q=
√ H
=
√ .18
= 4242.64= 4243 jars

Page | 7
 Q d 4000 27000
TC= ( ) H + ( ) s = ( ).18 + ( ) 60 = $381.87 + %381.81= $763.68
2 Q 2 4000

Savings per month using EOQ= $765-$763.68= $1.32

Q=4000= $1.32 per month

b) Using the current Q=4000, total monthly cost= $765

10 times per month Q= 27000/10= 2700

Set TC (Q=27000)= $765 and solve for S

Q d 27000 27000
TC= ( ) H + ( ) s= ( ).18 + ( ) s= $765
2 Q 2 2700

$243= 10s= $765

10s= $765-$243

S=$522/10

S=$52.20

Order cost.

c) Cost for order size Q = 27000 x 50/Q + 0.18 x Q/2 = 843

0.09Q2 – 843Q + 1350000 = 8432

Q = (843 ±SQRT (8432 – 4 x 1350000 X0.09))/2x0.09 = 843± 474/0.18 = 3476 = 2050

Page | 8
Answer to the question no 20

EDDLT = 600 lb

Ϭ dlt =52 lb

Stock risk = 4%

c) SS for 4% risk of stock out,

Using appendix B, table B we look for the z value corresponding to 1.00- .04=.96

The closest probability is .9599 which corresponding is z= 1.75

SS= zϬdlt = 1.75(52)= 91 units

B) ROP = EDDLT + S= 600+91+ 691 UNITS

d) with no safety stock, stock out risk is 5%(Z=0.00)

Answer to the question no 23

d = 85 boards/day

ROP= 625 boards

LT= 6 days

ϬLT= 1.1 days

Determine the probability of a stock out:

ROP= d x LT = zdϬlt

625=(85*6)+z (85)*(1.1)

625=510+93.5z

Page | 9
115=93.5

Z=115/93.5

Z=1.23

Using appendix B, table B, we find a probability of .8907

The risk of stock out = 1- .8907= .1093 = 10.93%

Answer to the question no 24

Given that:

Service level: 96%

¯d: 12 units per day

αd: 2units per day

¯LT: 4 Days

α LT: 1 day

a. Determine the ROP:

Appendix B, Table B, looking for the z value corresponding to .96

Closest probability is .9599, which corresponds to z= 1.75

ROP: ¯d x ¯LT + z √ LTα 2 d +d 2 α <2

: (12x4) +1.75√ ¿ ¿2) + (122 x 12)

: 70.14 = 71 units

b. If the seasonality is being presented during a rush, the model may not be appropriate. It
would become slow and in turn the year ROP would be set too high.

Page | 10
Answer to the question no 26
Given that:

¯d: 5 boxes per week

αd: .5 boxes per week

LT: 2 weeks

S: $2

H= $.20 per box per year

a. We know a year has 52 weeks, determine the EOQ:

D: 52x5=260

√
Qo= 2 DS =¿ 2(260)(2) ¿ = 72.11 =72 units
H .20 √
b. If Rop= 12, determine risk of a stock out:

ROP: ¯d(LT)+z(αd)√ ¿

Plugging in values and solving for z:

12= 5(2) + z (.5)√ 2

12=10+.707z

2=.707z

Z=2/.707=2.83

From appendix B, Table B, the lead time service level is .9977

Risk of stock out = 1-.9977=.0023=23%

Page | 11
 c. OI = 7 weeks, determine the risk of running out before this order arrives (Q=36) if the
copy center orders when amount on hand = 12

ROP: ¯d(LT) + z (αd)√ ¿

Plugging in values and solving for z:

12-5(2) + z (.5) √ 2

12=10+.707z

2=.707z

Z=2/.707=2.83

From appendix B, Table B, the lead time service level is .9977

Risk of stockout = 1-.9977=.0023=23%

Answer to the question no 29

Given that,

D= 1200 cases

S= $40 per order

H= $3 per case per year

Service level= 99%

a. Determine the optimal order quality :

√
Qo= 2 DS =¿ 2(1200)( 40) ¿ = 178.89 =179 units
H √ 3

Page | 12
 b. Determine the level of safety stock if lead time demand is normally distributed with
mean of 80 cases and standard deviation of 6 cases:

EDDLT= 80

αd.T=6

Using appendix B, Table B, we look for the z value corresponding to 0.99.

The closest probability is .9901, which corresponds to z= 2.33

SS= ZαdLT=2336(6) = 13.98=14 round.

Answer to the question no 30

Given that,

αd= 14 gallons

LT= ½ week

d=250gallons

Z(98%)=2.06

a. Negative safety stock implies overstock and when there is overstock, there is no use of
safety stock

Ss = Z √ 6 d 2LT + 6LT2

=296 x √ (14)2 x ½+ 62 x 2502

=2039

=20.4

b. Expected number = probability of stock out X d

Page | 13
=7% X 250

= 5 gallon

So unit Stock will be zero.

Page | 14