Assignment 2 Comm 441-201 Winter 2014-15 Due February 11, 2015 1. Suppose two truck services are being considered for deliveries from a company plant to one of its warehouses. Service B is cheaper but slower and less reliable than service A. The following information has been assembled: Demand (known) 9,600 cwt./year Order Cost $100/order Produce price, f.o.b. source $50/cwt. Shipping quantity As per EOQ In-transit carrying cost 20%/year Inventory-carrying costs 30%/year Out-of-stock costs unknown Selling days 365 days/year Service A B Transit time (LT) 4 days 5 days Variability (std. dev, s(LT) 1.5 days 1.8 days Rate $12.00/cwt. $11.80/cwt. A reorder point control method of inventory control is used at the warehouse. From the point of view of the inventory in the warehouse, which truck service should be selected? Note see Chapter 9 for inventory management. (Hint: the standard deviation of the demand-during lead time distribution is s’=d(s(LT)) where s(LT) is assumed the transit time variability and d is the daily demand rate) (12) 2. The High Volt Electric Company has a difficult time predicting the quarterly sales for its room air conditioner line due to the substantial seasonality in product sales. Quarterly sales data for the last three years are shown as follows: Last Year Two Years Ago Three Years Ago Quarter Units Quarter Units Quarter Units 1 34000 1 30000 1 27000 2 82000 2 73000 2 70000 3 51000 3 48000 3 41000 4 16000 4 15000 4 130002 (a) Determine the best straight-line trend using simple regression analysis. (8) (b) Determine the seasonal indices for each quarter using the trendline values in your seasonal index computations. (6) (c) Using classic time series decomposition, forecast the sales for the next four quarters. (4) 3. An automatic teller machine (ATM) is being installed at a branch of Metrobank. From the bank’s research, it figures to indirectly benefit from offering this service. Estimates are that the bank will generate revenues at the rat eof 1 percent of the money passed through the machine in the form of new customer accounts for checking services, loans, savings accounts and the like. The average withdrawal from the ATM is $75, and the bank figures its cost of money to be 10 percent per year. Stocking the machine for the two-day weekend is it most difficult planning problem. From historical records for other ATMs, the bank estimates the average number of withdrawals to be 120 with a standard deviation of 20, with a normal distribution. How much money should the bank stock in the machine for the weekend? (Hint: consider as a single order problem) (10) Total 40
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