PROBLEMS

1. The monthly sales for Yazie Batteries, Inc., were as follows:

Janu
ary
20

Febr
uary
21

Mar
ch
15

Ap
ril
14

M
ay
13

Ju
ne
16

Ju
ly
1
7

Aug
ust
18

Septe
mber
20

Octo
ber
20

Nove
mber
21

Dece
mber
23

a. Plot the monthly sales data.

b. Forecast January sales using each of the following:
- Nave method
- A 3-month moving average
- A 6-month weighted moving average using 0.1, 0.1,0.1, 0.2, 0.2, and
0.3 with heaviest weights applied on the recent month.
- Exponential smoothing using an =0.3, and a September forecast of
18.
- A trend projection.
c. Which method would allow you to forecast next March?

2. The Carbondale Hospital is considering the purchase of a new ambulance.

The decision will rest partly on the anticipated mileage to be driven next year.
The miles driven during the past 5 years are as follows:
Year
Mileage
1
3,000
2
4,000
3
3,400
4
3,800
5
3,700
a. Forecast the mileage for next (6th year) using a 2-year moving average.
b. Find the MAD based on a 2-year moving average.
c. Use the weighted moving average with weights of 0.4, and 0.6. What is
the MAD?

3. Bus and subway rideship for summer months in London, England is believed
to be tied heavily to the number of tourists visiting the city. During the past
12 years, the data on the table has been recorded:
Year

1
2
3
4
5

Number of
Tourists in
(Millions)
7
2
6
4
14

Ridership (in
Millions)
1.5
1.0
1.3
1.5
2.5

a.
b.
c.
d.
e.
f.
g.

6
15
2.7
7
16
2.4
8
12
2.0
9
14
2.7
10
20
4.4
11
15
3.4
12
7
1.7
Plot these data, is there a linear relationship between number of tourist
and ridership?
Develop a regression relationship.
What is the expected ridership if 10 Million tourists visit London in a next
year?
Explain the predicted ridership if there are no tourists at all.
What is the standard error of the estimate?
What is the models correlation coefficient?
What does the correlation coefficient mean?

4. Abey Kuruvilla, of Parkside Plumbing, uses 1,200 of a certain spare part that
costs $25 for each order, with an annual holding cost of $24.
a. Calculate the cost of order sizes of 25, 40, 50, 60 and 100.
b. Identify the economic order quantity and consider the implications for
making an error in calculating economic order quantity.
5. Lead time for one of your fastest-moving products is 21 days. Demand during
the period averages 100 units per day
a. What would be the appropriate re-order point?
b. How does your answer change if demand during lead time doubles?
c. How does your answer change if during lead time drops in a half?
6. M. P. VanOyen Manufacturing has gone out of bid for a regulator component.
Expected demand is 700 units per month. The item can be purchased from
either Allen Manufacturing or Baker Manufacturing. Their price lists are shown
on the table below. Ordering cost is $50, and annual holding cost per unit is
$5.
Allen Mfg.
Baker Mfg.
Quantity
Unit Price
Quantity
Unit Price
1-499
$16.00
1-399
$16.10
500- 999
15.50
400-799
15.60
1,000 +
15.00
800 +
15.10
a. What is the economic order quantity?
b. Which supplier should be chosen? Why?
c. What is the optimal order quantity and the total cost of ordering,
purchasing, and holding component?
7. Race One Motor is an Indonesian Car manufacturer. At its largest
manufacturing facility, in Jakarta, the company produces subcomponents at
a rate of 300 per day, and uses these subcomponents at a rate of 12,5000
per year(of 250 working days per year), and ordering costs are $30 per order.

a.
b.
c.
d.

What is the economic production quantity?

How many production runs per year will be made?
What will be the maximum inventory level?
What percentage of time will the facility will be producing the
components?

8. Par, Inc., produces a standard golf bag and a deluxe golf bag on a weekly
basis. Each golf bag requires time for cutting and dyeing and time for sewing
and finishing, as shown in the following table:
Hours required per bag
Cutting and Dyeing
1/2
1

Product
Standard bag
Deluxe bag

Sewing and finishing

1
2/3

The profits per bag and weekly hours available for cutting and dyeing and for
sewing and finishing are as follows:
Product
Standard bag
Deluxe bag

Activity

Profit per
unit
10
8

Weekly hours
available
300

Cutting and
dyeing
Sewing and
360
finishing
Par, Inc., will sell whatever quantities it produces of these two products.
a. Find the mix of a standard and deluxe golf bags to produce per week that
maximizes weekly profit from these activities.
b. What is the value of the profit?

9. Solve the following linear programming model graphically.

Minimize costs = 4X1 + 5X2
Subject to:
X1 + 2X2 80
3X1 + X2 75
X1 , X 2 0