SOLVED PROBLEMS IN

PRODUCTION
PLANNING & CONTROL

August 2012
 Solved Problems in Production Planning & Control 2012

FORMULAS IN PRODUCTION PLANNING & CONTROL

I. Forecasting

Weighted Moving Average

WMAn = W iDi
i=1

where

W i = the weight for period i, between 0 and 100 percent

Di = demand in period i

Exponential Smoothing

Ft+1 = Dt + (1 – ) Ft

where

Ft+1 = the forecast for the next period

Dt = actual demand in the present period
Ft = the previously determined forecast for the present period
= a weighting factor referred to as the smoothing constant

Adjusted Exponential Smoothing

AFt+1 = Ft+1 + Tt+1

where

T = an exponentially smoothed trend factor

Tt+1 = (Ft+1 – Ft) + (1 – )Tt

where

Tt = the last period’s trend factor

= a smoothing constant for trend

Linear Trend Line

y = a + bx

where

a = intercept (at period 0)

b = slope of the line
x = the time period

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y = forecast for demand for period x

xy – nxy
b = -------------------------
x2 – nx2

a = y – bx

where

n = number of periods

x
x = ----------------- = the mean of the x values
n

y
y = ----------------- = the mean of the y values
n

Seasonal Factor

Di
Si = --------------
D

where

Di = demand in period i

Forecast Accuracy

Mean Absolute Deviation (MAD)

Dt – Ft /
MAD = -------------------------
n

where

t = the period number

Dt = demand in period t
Ft = the forecast for period t
n = the total number of periods
/ / = absolute value

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Mean Absolute Percent Deviation (MAPD)

Dt – Ft /
MAPD = -------------------------
Dt

Cumulative Error

E= et

Average Error

et
E = ------------------
n

Forecast Control

(Dt – Ft ) E
Tracking Signal = ---------------------------------- = ----------------
MAD MAD

(Dt – Ft )2
Mean Squared Error = ---------------------------------
n–1

Linear Regression

y = a + bx

where

a = the intercept
b = the slope of the line
x = the independent variable
y = the dependent variable

xy – nxy
b = -------------------------
2 2
x – nx

a = y – bx

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where

n = number of variables

x
x = ----------------- = the mean of the x data
n

y
y = ----------------- = the mean of the y data
n

Correlation

n xy – x y
r = --------------------------------------------------------
[n x2 – ( x)2] [n y2 – ( y)2]

Coefficient of Determination = r2

II. Inventory Management

Basic Economic Order Quantity Model

Annual Ordering Cost

CoD
Annual Ordering Cost = ------------
Q

where

Co = Cost per order

D = Annual demand
Q = Order Size

Annual Carrying Cost

CcQ
Annual Carrying Cots = ------------
2

where

Cc = Annual per-unit carrying cost

Q/2 = Average inventory level

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Total Annual Inventory Cost

CoD CcQ
TC = -------------- + ---------------
Q 2

Optimal Value of Q

2CoD
Qopt = -----------------
Cc

Total Minimum Cost

CoD CcQopt
TCmin = -------------- + ----------------
Qopt 2

EOQ Model with Non Instantaneous Order Receipt

Let:

p = daily rate at which the order is received over time, also known as the production rate.

d = the daily rate at which inventory is demanded.

Maximum Inventory Level = Q (1 – d/p)

Average Inventory Level = (Q/2)(1 – d/p)

Total Carrying Cost = (CcQ/2)(1 – d/p)

CoD CcQ
Total Annual Inventory Cost = ------------- + ------------- (1 – d/p)
Q 2

Optimal Value Q

2CoD
Qopt = ---------------------
Cc(1 – d/p)

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Quantity Discounts

Total Inventory Cost with Quantity Discounts

CoD CcQ
TC = -------------- + --------------- + PD
Q 2

where

P = per unit price of the item

D = annual demand

Reorder Point with Constant Demand

R = dL

where

d = demand rate per period (e.g. daily)

L = lead time

Reorder Point with Variable Demand

R = dL + z d L

where

dL = average daily demand

L = lead time
d = the standard deviation of daily demand
Z = number of standard deviations corresponding to the service level probability
z d L = safety stock

Fixed-Time-Period Order Quantity with Variable Demand

Q = d(tb + L) + (z d tb + L ) – I

where

d = average demand rate

tb = the fixed time between orders
L = lead time
d = the standard deviation of demand
z d tb + L = safety stock
I = inventory in stock

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III. Material Requirements Planning

Capacity

Capacity = (no. of machines) x (no. of shifts) x (utilization) x (efficiency)

Utilization

Time Working
Utilization = --------------------------------------
Total Time Available

Load Percent

Load
Load Percent = -------------------- x 100%
Capacity

IV. Scheduling

Minimum Slack

SLACK = (due date – today’s date) – (processing time)

Critical Ratio

Time Remaining Due Date – Today’s Date

CR = ------------------------------ = -------------------------------------------
Work Remaining Processing Time

Sequencing Jobs through One Process:

Assignment Method of Linear Programming Procedure

1. Perform row reductions by subtracting the minimum value in each row from all other row values.
2. Perform column reductions by subtracting the minimum value in each column from all other
column values.
3. The resulting table is an opportunity cost matrix. Cross out all zeroes in the matrix using the
minimum number of horizontal or vertical lines.
4. If the number of lines equals the number of rows in the matrix, an optimum solution has been
reached and assignments can be made where the zeros appear. Otherwise, modify the matrix by
subtracting the minimum uncrossed value from all other uncrossed values and adding this same
amount to all cells where two lines intersect. All other values in the matrix remain unchanged.
5. Repeat steps 3 and 4 until an optimum solution is reached.

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Sequencing Jobs through Two Serial Processes:

Johnson’s Rule/ Procedure

1. List the time required to complete each job at each process. Set up a one dimensional matrix to
represent the desired sequence with the number of slots equal to the number of jobs.
2. Select the smallest processing time at either process. If that time occurs at process 1, put the
associated job as near to the beginning of the sequence as possible.
3. If the smallest time occurs at process 2, put the associated job as near to the end of the
sequence as possible.
4. Remove the job from the list.
5. Repeat steps 2 – 4 until all slots in the matrix have been filled or all jobs have been sequenced.

V. Just-In-Time Systems

Number of Kanbans

Average Demand During Lead Time + Safety Stock

N = --------------------------------------------------------------------------------
Container Size

dL +S
N = --------------------
C

where

N = number of kanbans or containers

d = average number of units demanded over some time period
L = lead time; the time it takes to replenish an order (expressed in the same terms as demand)
S = safety stock; usually given as a percentage of demand during lead time but can be based on service
and variance of demand during lead time
C = container size

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SOLVED PROBLEMS IN PRODUCTION PLANNING & CONTROL - QUALITATIVE

1. The facilities, functions, and activities involved in producing and delivering a product or service, from
suppliers to customers.

a. Supply Chain b. Procurement

c. Sourcing d. Delivery

Answer: a. Supply Chain

2. He introduced the interchangeable parts that allowed the manufacture of firearms, clocks, watches,
sewing machines, and other goods to shift from customized one-at-a-time production to volume
production of standardized parts.

a. Frederick W. Taylor b. Henry Ford

c. Adam Smith d. Eli Whitney

Answer: d. Eli Whitney

3. When higher levels of output cost more per unit to produce is called –

a. Diseconomies of Scale b. Disaggregation

c. Economies of Scale d. Lag Capacity

Answer: a. Diseconomies of Scale

4. As the number of units produced increases, the cost of producing each individual unit decreases, which
is known as --

a. Learning Curves b. Capital Investment

c. Economies of Scale d. Demand-Supply Analysis

Answer: c. Economies of Scale

5. A mathematical technique that solves a set of four quadratic equations to determine the optimal
workforce size and production rate.

a. Mixed Decision Rule b. Level Decision Rule

c. Search Decision Rule d. Linear Decision Rule

Answer: d. Linear Decision Rule

6. A level of inventory in stock at which a new order is placed.

a. Reorder Point b. Service Level

c. Order Cycle d. Stockout

Answer: a. Reorder Point

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7. It is the setting of broad policies and plans for using the resources of a firm to best support the firm’s
long term competitive strategy

a. Operations b. Operations Management

c. Operations Strategy d. Strategic Planning

Answer: c. Operations Strategy

8. An average demand for a fixed sequence of periods including the most recent period.

a. Weighted Moving Average b. Moving Average

c. Exponential Smoothing d. Short Range Forecast

Answer: b. Moving Average

9. These are the basic criteria that permit the firm’s products to be considered as candidates for purchase
by customers.

a. Competitive Advantage b. Value Added

c. Order Winners d. Order Qualifiers

Answer: d. Order Qualifiers

10. A transportation route along which shipments cannot be transported.

a. Limited Route b. Prohibited Route

c. Circle Route d. Unbalanced Route

Answer: b. Prohibited Route

11. An aggregate planning strategy that varies two or more capacity factors to determine a feasible
production plan.

a. Mixed Strategy b. Pure Strategy

c. Level Strategy d. Chase Strategy

Answer: a. Mixed Strategy

12. These are the criteria that differentiate the products and services of one firm from another.

a. Competitive Advantage b. Value Added

c. Order Winners d. Order Qualifiers

Answer: c. Order Winners

13. A pricing schedule in which lower prices are provided for specific higher order quantities is called –

a. Quantity Discount b. Reorder Discount

c. Stockout Price d. Inventory Price

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Answer: a. Quantity Discount

14. Typically component parts or materials used in the process to produce a final product is called –

a. Independent Demand b. Fixed Demand

c. Dependent Demand d. Variable Demand

Answer: c. Dependent Demand

15. A measure computed by dividing the cumulative error by MAD and it is used for monitoring bias in a
forecast.

a. Tracking Signal b. Coefficient Factor

c. Seasonal Factor d. Smoothing Constant

Answer: a. Tracking Signal

16. A computerized system that plans all the resources necessary for manufacturing, including financial
and marketing analysis, feedback loops, and overall business plan.

a. Enterprise Resource Planning b. Manufacturing Resource Planning

c. Capacity Requirements Planning d. Material Requirements Planning

Answer: b. Manufacturing Resource Planning

17. A method for classifying inventory items according to their dollar value to the firm based on the
principle that only a few items account for the greatest dollar value of total inventory.

a. Fixed-Time-Period System b. Continuous Inventory System

c. Fixed-Order-Quantity System d. ABC System

Answer: d. ABC System

18. The production of a very high-volume commodity product with highly automated equipment is called --

a. Mass Production b. Continuous Production

c. Batch Production d. Flexible Production

Answer: b. Continuous Production

19. The process of determining the quantity and timing of production over an intermediate time frame is
called --

a. Capacity Planning b. Aggregate Production Planning

c. Management Coefficients Model d. Level Production

Answer: b. Aggregate Production Planning

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20. The limiting of suppliers or transportation carriers for a company to a relative few is called –

a. Group-Sourcing b. Double-Sourcing
c. Single-Sourcing d. Demand-Sourcing

Answer: c. Single-Sourcing

21. It is the design and operation of productive systems.

a. Operations b. Operations Management

c. Operations Function d. Craft Production

Answer: b. Operations Management

22. It measures the portion of the variation in the dependent variable that can be attributed to the
independent variable.

a. Coefficient of Correlation b. Coefficient of Error

c. Coefficient of Determination d. Forecast Error

Answer: c. Coefficient of Determination

23. The process of breaking down the aggregate plan into more detailed plans.

a. Diseconomies of Scale b. Disaggregation

c. Economies of Scale d. Lag Capacity

Answer: b. Disaggregation

24. A list of all the materials, parts, and assemblies that make up a product, including quantities, parent-
component relationships, and order of assemblies.

a. Bill of Materials b. Inventory Master File

c. Parts List d. Product Structure File

Answer: a. Bill of Materials

25. A procedure for acquiring informed judgments and opinions from knowledgeable individuals to use as
a subjective forecast.

a. Delphi Method b. Qualitative Forecast Method

c. Time Series Method d. Quantitative Forecast Method

Answer: a. Delphi Method

26. The cost of replenishing the stock of inventory including requisition cost, transportation and shipping,
receiving, inspection, handling, and so forth is called –

a. Carrying Cost b. Ordering Cost

c. Shortage Cost d. Fixed Cost

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Answer: b. Ordering Cost

27. The probability that the amount of inventory on hand during the lead time is sufficient to meet
expected demand.

a. Reorder Point b. Service Level

c. Order Cycle d. Stockout

Answer: b. Service Level

28. A forecast using the linear regression equation to relate demand to time.

a. Linear Trend Line b. Linear Regression

c. Regression Forecasting Method d. Time Series Method

Answer: a. Linear Trend Line

29. The total length of time required to manufacture a product and it is also the longest path through a
product structure.

a. Cycle Time b. Slack Time

c. Elemental Time d. Cumulative Lead Time

Answer: d. Cumulative Lead Time

30. The absolute forecast error measured as a percent of demand.

a. Mean Square Error b. Mean Absolute Deviation

c. Mean Absolute Percent Deviation d. Average Regression

Answer: c. Mean Absolute Percent Deviation

31. A computerized system with relational data base management, client/ server architecture, and
expanded scope to cover enterprise-wide activities.

a. Enterprise Resource Planning b. Manufacturing Resource Planning

c. Capacity Requirements Planning d. Material Requirements Planning

Answer: a. Enterprise Resource Planning

32. A mathematical relationship that relates a dependent variable to two or more independent variables.

a. Multiple Regression b. Linear Regression

c. Regression Forecasting Method d. Time Series Method

Answer: a. Multiple Regression

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33. It is a function or system that transforms inputs into outputs of greater value.

a. Operations b. Operations Management

c. Operations Function d. Craft Production

Answer: a. Operations

34. The time that it takes for a group of jobs to be completed – that is, the completion time of the last job
in a group.

a. Makespan b. Loading Time

c. Flow Time d. Sequencing Time

Answer: a. Makespan

35. A class of mathematical techniques that relate demand to factors that cause demand behavior.

a. Multiple Regression b. Linear Regression

c. Regression Forecasting Method d. Time Series Method

Answer: c. Regression Forecasting Method

36. A stock of items kept by an organization to meet internal or external customer demand.

a. Safety Stock b. Inventory

c. Reorder Point d. Economic Order Quantity

Answer: b. Inventory

37. The process of subtracting an item’s lead time from its due date to determine when an order should
be released is called --

a. Netting b. Loading
c. Lead Time Offsetting d. Time Fence

Answer: c. Lead Time Offsetting

38. An oscillating movement in demand that occurs periodically in the short run and is repetitive.

a. Seasonal Factor b. Seasonal Pattern

c. Tracking Signal d. Random Variation

Answer: b. Seasonal Pattern

39. The processing of a single order in separate batches at multiple machines simultaneously is called –

a. Netting b. Order Splitting

c. Lead Time Offsetting d. Time Fence

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Answer: b. Order Splitting

40. It is a philosophy based on observation, measurement, and analysis that identifies the best method
for performing each job. Once determined, the methods were standardized for all workers, and
economic incentives were established to encourage workers to follow the standards.

a. Mass Production b. Hawthorne Studies

c. Management Science d. Scientific Management

Answer: d. Scientific Management

41. Also known as the production lot-size model; an inventory system in which an order is received
gradually and the inventory level is depleted at the same time it is being replenished.

a. Periodic Inventory System b. Continuous Inventory System

c. Instantaneous Receipt Model d. Non-Instantaneous Receipt Model

Answer: d. Non-Instantaneous Receipt Model

42. A class of statistical methods that uses historical demand data over a period of time to predict future
demand.

a. Multiple Regression b. Linear Regression

c. Regression Forecasting Method d. Time Series Method

Answer: d. Time Series Method

43. The process of speeding up orders so that they are completed in less than their normal lead time.

a. Explosion b. Expediting
c. Netting d. Time Fence

Answer: b. Expediting

44. The percent of capacity utilization at which unit costs are lowest.

a. Capacity Cushion b. Economies of Scale

c. Best Operating Level d. Yield Management

Answer: c. Best Operating Level

45. An inventory shortage occurring when demand exceeds the inventory in stock is called –

a. Reorder Point b. Service Level

c. Order Cycle d. Stockout

Answer: d. Stockout

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46. A computerized inventory control and production planning system for generating purchase orders and
work orders of materials, components, and assemblies.

a. Enterprise Resource Planning b. Manufacturing Resource Planning

c. Capacity Requirements Planning d. Material Requirements Planning

Answer: d. Material Requirements Planning

47. A shop paper that specifies the sequence in which jobs should be processed; it is often derived from
specific sequencing rules.

a. Dispatch List b. Work Package

c. Flow Time d. Loading

Answer: a. Dispatch List

48. An aggregate planning strategy that schedules production to match demand and absorbs variations in
demand by adjusting the size of the workforce.

a. Mixed Strategy b. Level Production

c. Pure Strategy d. Chase Demand

Answer: d. Chase Demand

49. The process of assigning priorities to jobs so that they are processed in particular order is called –

a. Scheduling b. Sequencing
c. Loading d. Load Leveling

Answer: b. Sequencing

50. It contains inventory status and descriptive information on every item in inventory.

a. Bill of Materials b. Inventory Master File

c. Parts List d. Product Structure File

Answer: b. Inventory Master File

51. When higher levels of output cost less per unit to produce is called –

a. Diseconomies of Scale b. Disaggregation

c. Economies of Scale d. Lag Capacity

Answer: c. Economies of Scale

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52. A scheduling approach that differentiates between bottleneck and non-bottleneck resources and
between transfer batches and process batches.

a. Synchronous Manufacturing b. Job Shop Operation

c. Gantt Chart d. Job Assignment

Answer: a. Synchronous Manufacturing

53. An operations strategy is concerned with which of the following?

a. Setting Specific Policies and Plans b. Short Term Competitive Strategies

c. Coordination of Operational Goals d. All of These

Answer: c. Coordination of Operational Goals

54. An aggregate planning technique that uses regression analysis to improve the consistency of
production planning decisions.

a. Capacity Planning b. Aggregate Production Planning

c. Management Coefficients Model d. Level Production

Answer: c. Management of Coefficients Model

55. The difference between a job’s due date and its completion time for those jobs completed after their
due date is called –

a. Check Time b. Tardiness

c. Slack Time d. Critical Ratio

Answer: b. Tardiness

56. The degree to which a nation can produce goods and services that meet the test of international
markets while simultaneously maintaining or expanding the real incomes of its citizens.

a. Competitiveness b. Globalization
c. Trading d. Commerce

Answer: a. Competitiveness

57. The cost of holding an item in inventory including lost opportunity costs, storage, rent, cooling,
lighting, interest on loans, and so on is called –

a. Carrying Cost b. Ordering Cost

c. Shortage Cost d. Fixed Cost

Answer: a. Carrying Cost

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58. He proposed the division of labor in which the production process was broken down into a series of
small tasks, each performed by a different worker. The specialization of the worker on limited,
repetitive tasks allowed him or her to become very proficient at those tasks and further encouraged the
development of specialized machinery.

a. Frederick W. Taylor b. Henry Ford

c. Adam Smith d. Eli Whitney

Answer: c. Adam Smith

59. An approach to scheduling that initially assumes infinite capacity and then manually “levels the load”
of resources that have exceeded capacity.

a. Infinite Scheduling b. Finite Scheduling

c. Load Leveling c. Synchronous Scheduling

Answer: a. Infinite Scheduling

60. A fixed order quantity that minimizes total inventory costs.

a. Safety Stock b. Inventory

c. Reorder Point d. Economic Order Quantity

Answer: d. Economic Order Quantity

61. A moving average with more recent demand values adjusted with weights.

a. Weighted Moving Average b. Moving Average

c. Exponential Smoothing d. Short Range Forecast

Answer: a. Weighted Moving Average

62. A measure of strength of the causal relationship between the independent and dependent variables in
a linear regression equation.

a. Cumulative Error b. Forecast Error

c. Coefficient d. Correlation

Answer: d. Correlation

63. An algorithm for sequencing any number of jobs through two serial operations to minimize makespan.

a. First Come First Served b. Earliest Due Date

c. Minimum Slack d. Johnson’s Rule

Answer: d. Johnson’s Rule

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64. Final or finished products that are not a function of, or dependent upon, internal production activity.

a. Independent Demand b. Fixed Demand

c. Dependent Demand d. Variable Demand

Answer: a. Independent Demand

65. It is the temporary or permanent loss of sales that will result when customer demand cannot be met.

a. Carrying Cost b. Ordering Cost

c. Shortage Cost d. Fixed Cost

Answer: c. Shortage Cost

66. A file that contains computerized bills of material for all products.

a. Master Production Schedule b. Inventory Master File

c. Parts List d. Product Structure File

Answer: d. Product Structure File

67. The time between the receipt of orders in an inventory system is called –

a. Reorder Point b. Service Level

c. Order Cycle d. Stockout

Answer: c. Order Cycle

68. Movements in demand that are not predictable and follow no pattern.

a. Seasonal Factors b. Seasonal Patterns

c. Tracking Signals d. Random Variations

Answer: d. Random Variations

69. Typically a strategy breaks down into what major components?

a. Operations Effectiveness b. Customer Management

c. Production Innovation d. All of These

Answer: d. All of These

70. Which of the following is the first phase of the typical phases of product development?

a. Product Engineering b. Product Planning

c. Concept Development d. Pilot Production

Answer: c. Concept Development

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71. Which of the following is the first step in building a house of quality in product development?

a. List of Customer Requirements b. Concept Development

c. Pilot Production d. Concurrent Engineering

Answer: a. List of Customer Requirements

72. The per-period average of the absolute difference between actual and forecasted demand is called –

a. Mean Square Error b. Mean Absolute Deviation

c. Mean Absolute Percent Deviation d. Average Regression

Answer: b. Mean Absolute Deviation

73. A manufacturing environment in which major subassemblies are produced in advance of a customer’s
order and are then configured to order.

a. Netting b. Order Splitting

c. Assemble-To-Order d. Expediting

Answer: c. Assemble-To-Order

74. An averaging method that weighs the most recent data more strongly than more distant data.

a. Weighted Moving Average b. Moving Average

c. Exponential Smoothing d. Short Range Forecast

Answer: c. Exponential Smoothing

75. The productive capability of a worker, machine, work center, or system is called –

a. Production Planning b. Capacity

c. Loading d. Scheduling

Answer: b. Capacity

76. A date specified by management beyond which no changes in the master schedule are allowed.

a. Netting b. Order Splitting

c. Cycle Counting d. Time Fence

Answer: d. Time Fence

77. The low-volume production of customized products is called --

a. Mass Production b. Continuous Production

c. Batch Production d. Flexible Production

Answer: c. Batch Production

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78. A method for auditing inventory accuracy that counts inventory and reconciles errors on a cyclical
schedule rather than once a year.

a. Cycle Counting b. Audit Cycle

c. Netting d. Time Fence

Answer: a. Cycle Counting

79. A system in which the inventory level is continually monitored; when it decreases to a certain level, a
fixed amount is ordered.

a. Fixed-Time-Period System b. Continuous Inventory System

c. Fixed-Order-Quantity System d. ABC System

Answer: b. Continuous Inventory System

80. The weighting factor given to the most recent data in exponential smoothing forecasts.

a. Tracking Signal b. Coefficient Factor

c. Seasonal Factor d. Smoothing Constant

Answer: d. Smoothing Constant

81. An aggregate planning strategy that produces units at a constant rate and uses inventory to absorb
variations in demand.

a. Mixed Strategy b. Level Production

c. Pure Strategy d. Chase Demand

Answer: b. Level Production

82. The process of determining requirements for lower-level items by multiplying the planned orders of
parent items by the quantity per assembly of component items is called --

a. Explosion b. Expediting
c. Netting d. Time Fence

Answer: a. Explosion

83. Which of the following is an example of a continuous type of process flow structure?

a. Fast Food b. Grocery

c. Hospital d. Chemical Operation

Answer: d. Chemical Operation

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84. A pattern search algorithm for aggregate planning.

a. Mixed Decision Rule b. Level Decision Rule

c. Search Decision Rule d. Linear Decision Rule

Answer: c. Search Decision Rule

85. Refers to the standard hours of work assigned to the facility .

a. Cycle Time b. Lead Time

c. Time Fence d. Load

Answer: d. Load

86. An aggregate planning strategy that varies only one capacity factor in determining a feasible
production plan.

a. Mixed Strategy b. Pure Strategy

c. Level Strategy d. Chase Strategy

Answer: b. Pure Strategy

87. A schedule for the production of end items or final products. It drives the MRP process that schedules
the production of component parts.

a. Assembly Schedule b. Load Schedule

c. Master Production Schedule d. Operations Schedule

Answer: c. Master Production Schedule

88. A numerical value that is multiplied by the normal forecast to get a seasonal adjusted forecast.

a. Seasonal Factor b. Seasonal Pattern

c. Tracking Signal d. Random Variation

Answer: a. Seasonal Factor

89. A system in which the inventory level is checked after a specific time period and a variable amount is
ordered, depending on the inventory in stock.

a. Variable-Time-Period System b. Continuous Inventory System

c. Periodic Inventory System d. ABC System

Answer: c. Periodic Inventory System

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90. The process of subtracting on-hand quantities from gross requirements to produce net requirements
is called –

a. Netting b. Order Splitting

c. Lead Time Offsetting d. Time Fence

Answer: a. Netting

91. A long term strategic decision that establishes the overall level of productive resources for a firm.

a. Capacity Planning b. Aggregate Production Planning

c. Management Coefficients Model d. Level Production

Answer: a. Capacity Planning

92. An approach to scheduling that loads jobs in priority order and delays to those jobs for which current
capacity is exceeded.

a. Infinite Scheduling b. Finite Scheduling

c. Load Leveling c. Synchronous Scheduling

Answer: b. Finite Scheduling

93. Stocks of partially completed items kept between stages of a production process are called –

a. Safety Stock b. Buffer Inventory

c. Reorder Point d. Stock Out

Answer: b. Buffer Inventory

94. It is also known as a continuous system; an inventory system in which a fixed, predetermined amount
is ordered whenever inventory in stock falls to a certain level called the reorder point.

a. Fixed-Time-Period System b. Continuous Inventory System

c. Fixed-Order-Quantity System d. ABC System

Answer: c. Fixed-Order-Quantity System

95. The process of smoothing out the work assigned across time and the available resources.

a. Infinite Scheduling b. Finite Scheduling

c. Load Leveling c. Synchronous Scheduling

Answer: c. Load Leveling

96. A percent of capacity held in reserve for unexpected occurrences.

a. Capacity Cushion b. Economies of Scale

c. Best Operating Level d. Yield Management

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Answer: a. Capacity Cushion

97. An inventory system in which a variable amount is ordered after a predetermined, constant passage
of time.

a. Fixed-Time-Period System b. Continuous Inventory System

c. Fixed-Order-Quantity System d. ABC System

Answer: a. Fixed-Time-Period System

98. Scheduling and monitoring day-to-day production in a job shop. It is also known as production control
or production activity control.

a. Synchronous Control b. Process Control

c. Input/ Output Control d. Shop Floor Control

Answer: d. Shop Floor Control

99. A mathematical technique that relates a dependent to an independent variable in the form of a linear
equation.

a. Linear Trend Line b. Linear Regression

c. Regression Forecasting Method d. Time Series Method

Answer: b. Linear Regression

100. A computerized system that projects the load from a given material plan onto the capacity of a
system and identifies under loads and over loads.

a. Enterprise Resource Planning b. Manufacturing Resource Planning

c. Capacity Requirements Planning d. Material Requirements Planning

Answer: c. Capacity Requirements Planning

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SOLVED PROBLEMS IN PRODUCTION PLANNING & CONTROL - QUANTITATIVE

1. The Razon Office Supply Company sells and delivers office supplies to companies, schools, and
agencies within 50-kilometer radius of its warehouse. The office supply business is competitive, and
the ability to deliver orders promptly is a factor in getting new customers and keeping old ones. The
manager of the company wants to be certain enough drivers and vehicles are available to deliver
orders promptly and they have adequate inventory in stock. Therefore, the manager wants to be able
to forecast the number of orders that will occur the next month. From the records of delivery orders,
management has accumulated the following data for the past 10 months, from which it wants to
compute 3-month moving average.

Month Orders

January 1200
February 900
March 1000
April 750
May 1100
June 500
July 750
August 1300
September 1100
October 900

a. 900 b. 1100
c. 1300 d. 3300

Answer: b. 1100

Solution:

900 + 1100 + 1300

MA3 = ------------------------------
3

MA3 = 1100 orders for November

2. In reference to problem no. 1, what is the 5-month moving average?

a. 910 b. 1110
c. 1310 d. 4550

Answer: a. 910

Solution:

900 + 1100 + 1300 + 750 + 500

MA5 = ------------------------------------------------
5

MA5 = 910 orders for November

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3. In reference to problem no. 1, the company wants to compute a 3-month weighted moving average
with a weight of 50 percent for the October data, a weight of 33 percent for the September data, and
a weight of 17 percent for the August data. These weights reflect the company’s desire to have the
most data influence the forecast most strongly.

a. 345 b. 450
c. 1034 d. 1045

Answer: c. 1034

Solution:

WMA3 = (0.50)(900) + (0.33)(1100) + (0.17)(1300)

WMA3 = 1034 orders for November

4. Marquez Computer Services assembles customized personal computers from generic parts. The
company has had steady growth since it started. The company assembles computers mostly at night,
using part time students. The company purchase generic computer parts in volume at a discount from
a variety of sources whenever they see a good deal. Thus, they need a good forecast of demand for
their computers so that they will know how many computer component parts to purchase and stock.
The company has accumulated the demand data in the table below for its computers for the past
twelve months, from which it wants to consider exponential smoothing forecasts using smoothing
constant equal to 0.30.

Period Month Demand

1 January 37
2 February 40
3 March 41
4 April 37
5 May 45
6 June 50
7 July 43
8 August 47
9 September 56
10 October 52
11 November 55
12 December 54

a. 50 b. 52
c. 54 d. 56

Answer: b. 52

Solution:

F2 = (0.30)(37) + (0.70)(37)
F2 = 37 units

F3 = (0.30)(40) + (0.70)(37)
F3 = 37.9 units

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Period Month Demand Forecast, Ft+1

1 January 37 -
2 February 40 37.00
3 March 41 37.90
4 April 37 38.83
5 May 45 38.28
6 June 50 40.29
7 July 43 43.20
8 August 47 43.14
9 September 56 44.30
10 October 52 47.81
11 November 55 49.06
12 December 54 50.84
13 January - 51.79

F13 = (0.30)(54) + (0.70)(50.84)

F13 = 51.79 = 52 for January next year

5. In reference to problem no. 4, compute for the accuracy of its forecast using MAD?

a. 3.58 b. 3.85
c. 4.58 d. 4.85

Answer: d. 4.85

Solution:

Computational Values for MAD

Period Month Demand, Dt Ft with = 0.30 /Dt – Ft/
1 January 37 37.00 -
2 February 40 37.00 3.00
3 March 41 37.90 3.10
4 April 37 38.83 1.83
5 May 45 38.28 6.72
6 June 50 40.29 9.69
7 July 43 43.20 0.20
8 August 47 43.14 3.86
9 September 56 44.30 11.70
10 October 52 47.81 4.19
11 November 55 49.06 5.94
12 December 54 50.84 3.15

Total 557 53.39

53.39
MAD = ------------- = 4.85
11

6. In reference to problem no. 5, what is its Mean Absolute Percent Deviation (MAPD)?

a. 9.1% b. 9.6%
c. 44.1% d. 44.6%

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Answer: b. 9.6%

Solution:

53.39
MAPD = -------------- x 100 = 9.6%
557

7. In reference to problem no. 4, the company wants to develop an adjusted exponentially smoothed
forecast using the same twelve months of demand. It will use the exponentially smoothed forecast
with constant = 0.5 and with a smoothing constant for trend of 0.30. What is the forecast in January
next year?

a. 51 b. 53
c. 55 d. 57

Answer: c. 55

Solution:

The adjusted forecast for February, AF2, is the same as the exponentially smoothed forecast, since the
trend computing factor will be zero i.e. F1 and F2 are the same and T2 = 0. Thus, we compute the adjusted
forecast for March, AF3, as follows:

T3 = (0.30)(38.5 – 37.0) + (1 – 0.30)(0)

T3 = 0.45

AF3 = F3 + T3
AF3 = 38.5 +0.45
AF3 = 38.95 units

Period Month Demand Forecast, Ft+1 Trend Tt+1 AFt+1

1 January 37 37.00 - -
2 February 40 37.00 0.00 37.00
3 March 41 38.50 0.45 38.95
4 April 37 39.75 0.69 40.44
5 May 45 38.37 0.07 38.44
6 June 50 41.68 1.04 42.73
7 July 43 45.84 1.97 47.82
8 August 47 44.42 0.95 45.37
9 September 56 45.71 1.05 46.76
10 October 52 50.85 2.28 53.13
11 November 55 51.42 1.76 53.19
12 December 54 53.21 1.77 54.98
13 January - 53.61 1.36 54.97

T13 = (0.30)(53.61 – 53.21) + (0.70)(1.77)

T13 = 1.36

AF13 = 53.61 + 1.36

AF13 = 54.97 = 55 units for January next year

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8. In reference to problem no. 4, the demand data for computers appears to follow an increasing linear
trend. The company wants to compute a linear trend line to see if it is more accurate than exponential
smoothing and adjusted exponential smoothing forecast. What is the forecast on period 13?

a. 52 b. 54
c. 56 d. 58

Answer: d. 58

Solution:

Least Squares Calculations:

x (period) y (demand) xy x2

1 37 37 1
2 40 80 4
3 41 123 9
4 37 148 16
5 45 225 25
6 50 300 36
7 43 301 49
8 47 376 64
9 56 504 81
10 52 520 100
11 55 605 121
12 54 648 144

Total 78 557 3867 650

78
x = --------------- = 6.5
12

557
y = --------------- = 46.42
12

3867 – [(12)(6.5)(46.42)]
b= -----------------------------------------------
650 – [12(6.5)2]

b = 1.72

a = 46.42 – (1.72)(6.5)
a = 35.2

y = 35.2 + 1.72x
y = 35.2 + 1.72(13) = 57.56 = 58 units for period 13

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9. Delima Farms grows chickens to sell to a meat processing company throughout the year. However, its
peak season is obviously during the fourth quarter of the year, from October to December. Delima
Farms has experienced the demand for chickens for the past three years shown in the following table:

Demand for Chickens at Delima Farms:

Demand (1,000s) per Quarter
Year 1 2 3 4 Total

2009 12.6 8.6 6.3 17.5 45.0

2010 14.1 10.3 7.5 18.2 50.1
2011 15.3 10.6 8.1 19.6 53.6

Total 42.0 29.5 21.9 55.3 148.7

What are the forecast per quarter in year 2012?

a. 12, 8, 7, 18 b. 14, 10, 8, 20

c. 16, 12, 9, 22 d. 18, 14, 10, 20

Answer: c. 16, 12, 9, 22

Solution:

42.0
S1 = ---------------- = 0.28
148.7

29.5
S2 = ---------------- = 0.20
148.7

21.9
S3 = ---------------- = 0.15
148.7

55.3
S4 = ---------------- = 0.37
148.7

Linear Trend Line for three years:

y = 40.97 + 4.30x
y = 40.97 + 4.30(4)
y = 58.17

SF1 = (S1)(F5) = (0.28)(58.17) = 16.28 = 16

SF2 = (S2)(F5) = (0.20)(58.17) = 11.63 = 12
SF3 = (S3)(F5) = (0.15)(58.17) = 8.73 = 9
SF4 = (S4)(F5) = (0.37)(58.17) = 21.53 = 22

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10. The Tomas University athletic department wants to develop its budget for the coming year using a
forecast for football attendance. Football attendance accounts for the largest portion of its revenues,
and the athletic director believes attendance is directly related to the number of wins by the team. The
business manger has accumulated total annual attendance for the past eight years.

No. of Wins Attendance No. of Wins Attendance

(1,000s) (1,000s)
4 36.3 6 44.0
6 40.1 7 45.6
6 41.2 5 39.0
8 53.0 7 47.5

Given the number of returning starters and the strength of the schedule, the athletic director believes the
team will win at least seven games next year. Develop a simple regression equation for this data to
forecast attendance next year.

a. 45,880 b. 46,880
c. 47,850 d. 48,850

Answer: b. 46,880

Solution:

Least Squares Computation:

x y
No. of Wins Attendance xy x2
(1,000s)

4 36.3 145.2 16
6 40.1 240.6 36
6 41.2 247.2 36
8 53.0 424.0 64
6 44.0 264.0 36
7 45.6 319.2 49
5 39.0 195.0 25
7 47.5 332.5 49

Total 49 346.9 2,167.7 311

49
x = --------------- = 6.125
8

346.9
y = --------------- = 43.36
8

(2,167.7) – [(8)(6.125)(43.36)]
b= -----------------------------------------------------
(311) – [(8)(6.125)2]

b = 4.06

a = 43.36 – (4.06)(6.125)

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a = 18.46

y = 18.46 + 4.06x
y = 18.46 + 4.06(7) = 46.88 = 46,880 attendance for 7 wins

11. In reference to problem no. 10, compute the correlation for the linear regression equation.

a. 0.647 b. 0.747
c. 0.847 d. 0.947

Answer: d. 0.947

Solution:

[(8)(2,167.7)] – [(49)(346.9)]
r = ------------------------------------------------------------------------ = 0.947

[(8)(311) – (49)2][(8)(15,224.75) – (346.9)2]

12. A manufacturing company has monthly demand for one its products as follows:

Month Demand

February 520
March 490
April 550
May 580
June 600
July 420
August 510
September 610

Develop a three-period moving average forecast.

a. 45,880 b. 46,880
c. 47,850 d. 48,850

Answer: b. 46,880

Solution:

520 + 490 + 550

MA3 = ------------------------------
3

MA3 = 1100

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13. The Zaki Motorcycle Dealer in Kamuning area wants to be able to forecast accurately the demand for
the Zaki Super VIII motorcycle during the next month. Because the manufacturer is in Japan, it is
difficult to send motorcycles back or reorder if the proper number is not ordered a month ahead. From
sales records, the dealer has accumulated the following data for the past year.

Month Motorcycle Sales

January 9
February 7
March 10
April 8
May 7
June 12
July 10
August 11
September 12
October 10
November 14
December 16

Compute a 3-month moving average forecast of demand for April through January (of the next
year) and a 5-month moving average forecast for June through January. Compare the two
forecasts computed in parts using MAD. Which one should the dealer use for January of the next
year?

a. 3-month moving ave with MAD = 1.89 b. 3-month moving ave with MAD = 2.89
c. 5-month moving ave with MAD = 2.43 d. 5-month moving ave with MAD = 1.43

Answer: a. 3-month moving ave with MAD = 1.89

Solution:

Month Sales a.) MA3 ΙEΙ b.) MA5 ΙEΙ

January 9
February 7
March 10
April 8 8.67 0.67
May 7 8.33 1.33
June 12 8.33 3.67 8.2 3.8
July 10 9 1 8.8 1.2
August 11 9.67 1.33 9.4 1.6
September 12 11 1 9.6 2.4
October 10 11 1 10.4 0.4
November 14 11 3 11 3
December 16 12 4 11.4 4.6
January 13.33 ____ 12.6 ____
17 17

MAD3 = 17/ 9 = 1.89

MAD5 = 17/ 7 = 2.43

The dealer should use the Three-month Moving Average w/a MAD of 1.89. The smaller the MAD,
the more accurate the forecast is.

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14. The manager of the Secreto Carpet outlet needs to be able to forecast accurately the demand for soft
carpet, its biggest seller. If the manager does not order enough carpet from the carpet mill, customers
will buy their carpets from one of Secreto’s many competitors. The manager has collected the
following demand data for the past eight months.

Months Demand for Soft Carpet (1,000 yd)

1 8
2 12
3 7
4 9
5 15
6 11
7 10
8 12

Compute a 3-month moving average forecast for months 4 through 9 and a weighted 3-month moving
average forecast for months 4 through 9. Assign weights 0.55, 0.33, and 0.12 to the months in sequence
starting with the most recent month. Compare the two forecasts using MAD. Which forecast appears to be
more accurate?

a. 3-month moving ave with MAD = 2.60

b. 3-month moving ave with MAD = 1.60
c. Weighted 3-month moving ave with MAD = 2.14
d. Weighted 3-month moving ave with MAD = 1.14

Answer: b. 3-month moving ave with MAD = 1.60

Solution:

MA3 = Di/3
= (8+12+7)/3
=9

WMA3 = W iDi
= 7(0.55) + 12(.33) + 8(0.12)
= 8.77

MAD (MA3) = Demand – MA3 / n

= 8/5
= 1.60
MAD (WMA3) = Demand – WMA3 / n
= 10.74/5
= 2.14

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Tabular Representation:

Month Demand MA3 WMA3 IĒI MA3 IĒI WMA3

1 8 - - - -
2 12 - - - -
3 7 - - - -
4 9 9 8.77 0 0.23
5 15 9.33 8,70 5.67 6.30
6 11 10.33 12.06 0.67 1.06
7 10 11.66 12.08 1.66 2.08
8 12 12 10.93 0 1.07
9 11 11.22 - -

Because MAD and the cumulative error are less for the weighted 3-month moving average
forecast, it would appear to be the most accurate.

15. The Glorioso Fertilizer Company distributes fertilizer to various lawn and garden shops. The company
must base its quarterly production schedule on a forecast of how many tons of fertilizer will be
demanded from it. The company has gathered the following data for the past three years from its
sales records.

Year Quarter Demand for Fertilizer (ton)

1 1 105
2 150
3 93
4 121
2 5 140
6 170
7 105
8 150
3 9 150
10 170
11 110
12 130

Compute a 3-quarter moving average forecast for quarters 4 through 13 and compute the forecast error
for each quarter and a weighted 3-quarter moving average forecast using weights of 0.50, 0.33, and 0.17
for the most recent, next recent, and most distant data, respectively, and compute the forecast error for
each quarter. Compare the forecasts developed using cumulative error. Which forecasts appears to be
more accurate?

a. 3-quarter moving ave with E = 27.00

b. 3-quarter moving ave with E = 32.00
c. Weighted 3-quarter moving ave with E = 33.50
d. Weighted 3-quarter moving ave with E = 28.05

Answer: d. Weighted 3-quarter moving ave with E = 28.05

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Solution:

3-Quarter Moving Average:

Year Quarter Demand (ton) MA3 E
1 1 105
2 150
3 93
4 121 116 5.00
2 5 140 121.33 18.67
6 170 118 52.00
7 105 143.67 38.67
8 150 138.33 11.67
3 9 150 156.67 8.33
10 170 143.33 35.00
11 110 156.67 -46.67
12 130 143.33 -13.33

32.00

Weighted 3-Quarter Moving Average with 0.50, 0.33, 0.17

YEAR QUARTER DEMAND (ton) WA3 E
1 1 105
2 150
3 93
4 121 113.85 7.15
2 5 140 116.69 23.31
6 170 125.74 44.26
7 105 151.77 -46.77
8 150 132.40 17.60
3 9 150 138.55 17.45
10 170 142.35 27.65
11 110 160 50.00
12 130 136 6.60

28.05

Comparison using Cumulative Error: 3-Quarter Moving Average with E = 32.00 and Weighted 3-Quarter
Moving Average with E = 28.05

Weighted 3-Quarter Moving Average is more accurate than the moving average because it has lower
error.

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16. Determine the seasonally adjusted forecast for the demand data for fertilizer in Problem No. 15 with
the use a linear trend line model to compute a forecast estimate for demand in year 4.

Year Quarter Demand for Fertilizer (ton)

1 1 105
2 150
3 93
4 121
2 5 140
6 170
7 105
8 150
3 9 150
10 170
11 110
12 130

a. Q1 = 299, Q2 = 257, Q3 = 228, Q4 = 206

b. Q1 = 219, Q2 = 247, Q3 = 278, Q4 = 266
c. Q1 = 149, Q2 = 187, Q3 = 118, Q4 = 156
d. Q1 = 159, Q2 = 178, Q3 = 138, Q4 = 176

Answer: c. Q1 = 149, Q2 = 187, Q3 = 118, Q4 = 156

Solution:

Year Quarter Quarter Quarter Quarter Total

1 105 150 93 121 469
2 140 170 105 150 565
3 15 170 110 130 560
Total 395 490 308 401 1594

S1 = Di / ∑D

S1 = 395 / 1594 S2 = 490 / 1594 S3 = 308 / 1594 S4 = 401 / 1594

= 0.24 = 0.30 = 0.19 = 0.25

Get the linear trend:

b = 45.51 a = 440.31 y = 440.31 + 45.51x

For the fourth year:

y = 1850 + 180(4)
y = 622.35

Using the annual forecast of demand, the seasonally adjusted forecast for year 4 is:

SF1 = (S1)(y) = (0.24)(622.35) = 149.36 = 149

SF2 = (S2)(y) = (0.30)(622.35) = 186.70 = 187
SF3 = (S3)(y) = (0.19)(622.35) = 118.24 = 118
SF4 = (S4)(y) = (0,25)(622.35) = 155.58 = 156

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17. The chairperson of the department of management at Razon University wants to forecast the number
of students who will enroll in production and operations management next semester in order to
determine how many sections to schedule. The chair has accumulated the following enrollment data
for the past eight semesters:

Semester Students Enrolled in POM

1 400
2 450
3 350
4 420
5 500
6 575
7 490
8 650

Compute a 3-semester moving average forecast for semesters 4 through 9 and the exponentially
smoothed forecast (α= 0.20) for the enrollment data. Compare the two forecasts using MAD and
choose the most accurate.

a. 3-Semester Moving Average with MAD = 80.33

b. 3-Semester Moving Average with MAD = 78.43
c. Exponentially smoothed forecast with MAD = 87.16
d. Exponentially smoothed forecast with MAD = 85.60

Answer: a. 3-Semester Moving Average with MAD = 27.00

Solution:

SEM STUDENTS MA3 │Dt-Ft│ Ft+1(α=.20) │Dt-Ft│

1 400
2 450 400.00 50.00
3 350 410.00 60.00
4 420 400 20.00 398.00 22.00
5 500 406.67 93.33 402.40 97.60
6 575 423.33 151.67 421.92 153.08
7 490 498.33 8.33 452.54 37.46
8 650 521.67 128.33 460.03 189.97
9 571.67 498.02
 
401.66 610.11

MAD MA3 = 401.66/5 = 80.33

MAD Ft+1 = 610.11/7 = 87.16

The 3-Semester Moving Average is more accurate because it has lower value of MAD.

18. The Dy Café in Espana, Manila, is well known for its popular homemade ice cream, which it makes in
a small plant in back of the café. People drive all the way from Alabang and Mandaluyong to buy the
ice cream. The two ladies who own the café want to develop a forecasting model so they can plan
their ice cream production operation and determine the number of employees they need to sell ice
cream in the café. They have accumulated the following sales records for their ice cream for the past
twelve quarters.

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Year Quarter Ice Cream Sales (gal)

1997 1 350
2 510
3 750
4 420
1998 5 370
6 480
7 860
8 500
1999 9 450
10 550
11 820
11 570

Determine the seasonally adjusted forecast for 1998 with the use of a linear trend line model.

a. Q1 = 486, Q2 = 608, Q3 = 836, Q4 = 596

b. Q1 = 466, Q2 = 628, Q3 = 846, Q4 = 576
c. Q1 = 356, Q2 = 518, Q3 = 776, Q4 = 456
d. Q1 = 376, Q2 = 508, Q3 = 796, Q4 = 486

Answer: d. Q1 = 376, Q2 = 508, Q3 = 796, Q4 = 486

Solution:

Year Quarter Quarter Quarter Quarter Total

1997 350 510 750 420 2030
1998 370 480 860 500 2210
1999 450 550 820 570 2390
Total 1170 1540 2430 1490 6630

S1 = Di / ∑D

S1 = 1170 / 6630 S2 = 1540 / 6630 S3 = 2430 / 6630 S4 = 1490 / 6630

= 0.17 = 0.23 = 0.36 = 0.22

Get the linear trend:

b = 180 a = 1850 y = 1850 + 180x

For the year 1998:

y = 1850 + 180(2)
y = 2210

Using the annual forecast of demand, the seasonally adjusted forecast for 1998 is:

SF1 = (S1)(y) = (0.17)(2210) = 375.70 = 376

SF2 = (S2)(y) = (0.23)(2210) = 508.30 = 508
SF3 = (S3)(y) = (0.36)(2210) = 795.60 = 796
SF4 = (S4)(y) = (0.22)(2210) = 486.20 = 486

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19. The purchasing manager for the Ormilon Steel Company must determine a policy for ordering coal to
operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate, and the
firm operates 360 days per year. The purchasing manager has determined that the ordering cost is
P80 per order, and the cost of holding coal is 20 percent of the average peso value of inventory held.
The purchasing manager has negotiated a contract to obtain the coal for P1200 per ton for the
coming year. Determine the optimal quantity of coal to receive in each other.

a. 100 b. 110
c. 120 d. 130

Answer: c. 120

Given:

12 converters 5 tons of coal/day 360 days/yr

Co = P80/ order
Cc = 20% of the ave. peso value of inventory held
P = P1200/ton

Solution:

Qopt = 2 (P80/ order) (12 converters)(5 tons/ converter)(360 days/ yr)

(0.20)(P1200)

Qopt = 2 (P80) (21,600)

(240)

= 120 tons of coal

20. In reference to problem no. 19, determine the total inventory related costs associated with the optimal
ordering policy with cost of coal not included.

a. 29,100 b. 31,600
c. 30,200 d. 28,800

Answer: d. 28,800

Solution:

Tc = CoD + Cc Qopt
Qopt 2

= (80)(21,600) + 240 (120)

120 2

= P 28,800

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21. In reference to problem no. 19 and if 5 days’ lead-time is required to receive an order of coal, how
much coal should be on hand when an order is placed?

a. 300 b. 350
c. 400 d. 450

Answer: a. 300

Solution:

R = dL= (12) (5) (5) = 300 coal

22. The Capulong Lumber Company and Mill processes 10,000 logs annually, operating 250 days per
year. Immediately upon receiving an order, the logging company’s supplier begins delivery to the
lumber mill at the rate of 60 logs per day. The lumber mill has determined that the ordering cost
is$1,600 per order, and the cost of carrying logs in inventory before they are processed is $15 per log
on an annual basis. Determine the optimal order size.

a. 3,540 b. 2,530
c. 4,250 d. 5,500

Answer: b. 2,530

Given:
D = 10,000 250 days/yr p = 60 logs/day
Co = $1600/order d = 10,000_
Cc = $15/log annually 250 days
= 40 logs / day

Solution:

a.) Qopt = 2 (1,600) (10,000)

15 1- 40
60

Qopt = 2,529.8 logs = 2,530 logs

23. In reference to problem no. 22, determine the total inventory cost associated with the optimal order
quantity.

a. 12,759 b. 11,531
c. 11,621 d. 12,649

Answer: d. 12,649

Solution:

Tc = CoD + Cc Qopt (1-d/p)

Qopt 2

= 1,600 (10,000) + 15 (2,529.8) 1-40

2,529.8 2 60

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Tc =$12,649.11 = $12,649

24. In reference to problem no. 22, determine the number of operating days between orders.

a. 59 b. 61
c. 63 d. 65

Answer: c. 63

Solution:

Order cycle time = __250 days

10,000/2,529.8

= 63.25 days = 63 days

25. In reference to problem no. 22, determine the number of operating days required to receive an order.

a. 42 b. 44
c. 46 d. 48

Answer: a. 42

Solution:

Production run = Q
p

= 2,529.8
60

= 42.16 days per order = 42 days

26. The Sanga Tire Company produces a brand of tire called the Roadrunner. The annual demand at its
distribution center is 17,400 tires per year. The transport and handling cost are $2,600 each time a
shipment of tires is ordered at the distribution center. The annual carrying cost is $3.75 per tire.
Determine the optimal order quantity and the minimum total annual cost.

a. 4,912 at $20,450 b. 5,126 at $19,530

c. 5,126 at $18,870 d. 4,912 at $18,420

Answer: d. 4,912 at $18,420

Given:
D = 17,400/yr Co = $ 3.75
Co = $ 2,600

Solution:

Qopt = 2CoD
Cc

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= 2 (2,600) (17,400)
3.75

Qopt = 4,912.03 = 4,912 tires

Tc = CoD + Qopt Cc
Qopt 2

= (2,600) (17,400) + (4,912.03) (3.75)

4,912.03 2

= $18,420.098 = 18,420

27. In reference to problem no. 26, the company is thinking about relocating its distribution center, which
would reduce transport and handling costs to $1,900 per order but increase carrying costs to $4.50
per tire per year. Determine the savings if the relocation pushes through.

a. $1,255 b. $1,850
c. $1,171 d. $1,625

Answer: c. $1,171

Solution:

Co = $1,900; Cc = $ 4.5

Qopt = 2CoD
Cc

= 2 (1,900) (17,400)
4.5

Qopt = 3,833.19

Tc = CoD + Qopt Cc
Qopt 2

= (1,900) (17,400) + (3,833.19) (4.5)

3,833.19 2

= $17,249

☺ The Company should relocate with the savings of $18,420 - $17,249 = $1,171

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28. The Ngo Farms produces its own natural organic fertilizer, which it sells mostly to the gardeners and
homeowners. The annual demand for fertilizer is 270,000 pounds. The company is able to produce
305,000 pounds annually. The cost to transport the fertilizer from the plan to the nursery is $620 per
load. The annual carrying load cost is $0.12 per pound. Compute the optimal order size.

a. 135,871 b. 143,753
c. 155,926 d. 163,125

Answer: c. 155,926

Given:

D = 270,000/yr p = 305,000/yr
Co = $620 Cc = $0.12

Solution:

Qopt = 2 (620) (270,000)

0.12 1- 270,000
305,000

Qopt = 155,925.8 = 155,926

29. In reference to Problem No. 28, compute the total minimum cost.

a. $2,253 b. $2,147
c. $2,534 d. $2,622

Answer: b. $2,147

Solution:

Tc = (620) (270,000) + 0.12 (155,925.8) 1- 270,000

155,925.8 2 305,000

Tc = $2,147.18 = $2,147

30. In reference to Problem No. 28, compute the maximum inventory level.

a. 17,893 b. 18,953
c. 19,261 d. 20,530

Answer: a. 17,893

Solution:
Max. Inv. Level = Q 1 - d
P

= 155,925.8 1 - 270,000
305,000

= 17,893.12 = 17,893

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31. If Ngo Farms in Problem No. 28 can increase production capacity to 360,000 pounds per year, what
will be the total inventory cost?

a. $1,934 b. $2,747
c. $3,169 d. $4,282

Answer: b. $3,169

Solution:

Qopt = 2 (620) (270,000)

0.12 1 - 270,000
360,000

Qopt = 105,640.9 tires

Tc = 620 (270,000) + .12 (105,640.9) 1- 270,000

105,640.0 2 360,000

Tc = $3,169.23 = $3,169

☺Increasing production capacity will not reduce total inventory cost

32. The Baldrige Kiln is an importer of ceramics from overseas. It has arranged to purchase a particular
type of ceramic pottery from a Chinese artisan. The artisan makes the pottery in 120-unit batches
and will ship only that exact amount. The transportation and the handling cost of a shipment is
$7,600 (not including the unit cost). The Baldrige Kiln estimates its annual demand to be 900 units.
What storage and handling cost per unit does it need to achieve in order to minimize its inventory
cost?

a. $6,120 b. $5,380
c. $4,760 d. $3,450

Answer: d. $3,450

Given:
Qopt = 120 Co = 7600
D = 900 Cc = ?

Solution:
Qopt = 2CoD
Cc
2

(120)2 = 2(7,600)(900)
Cc

14,400 = 49,680,000
Cc
Cc = 49,680,000
14,400
Cc = $3,450 / unit is needed to achieve in order to minimize its inventory cost.

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33. The Ligan Carpet Discount Store has annual demand of 10,000 yards of Super Shag carpet. The
annual carrying cost for a yard of this carpet is $0.75 and the ordering cost is $150. The carpet
manufacturer normally charges the store $8 per yard for the carpet. However, the manufacturer has
offered a discount price of $6.50 per yard if the store will order 5,000 yards. How much should the
store order and the total annual inventory cost for that order quantity?

a. 5,000 at $67,175 b. 5,000 at $65,325

c. 2,000 at $81,500 d. 3,000 at $78,420

Answer: a. 5,000 at $67,175

Given:

D = 10,000 yards Co = $150

Cc = $ .75/yrd P = $ 8/yrd
Discount price= $ 6.5/yrd with minimum order of 5,000 yrds.

Solution:

Qopt = 2CoD Discounted:

Cc Qopt = 5,000

= 2 (150) (10,000) Tc = 150 (10,000) + 0.75(5,000) + 6.5 (10,000)

0.75 5,000 2

= 2,000 yards Tc = $67,175

Tc = CoD + Cc Qopt + PD
Qopt 2

= 150 (10,000) + 0.75 (2,000) + 8(10,000)

2,000 2

= $81,500

☺The store should order 5,000 to avail discount and only have a total cost of $67,175

34. The Sta. Maria Bar buys draft beer by the barrel from a local distributor. The bar has an annual
demand of 900 barrels, which it purchases at a price of $205 per barrel. The annual carrying cost is
$24.60, and the cost per order is $160. The distributor has offered the bar a reduced price of $190
per barrel if it will order a minimum of 300 barrels. What is the cost difference if the bar takes the
discount?

a. $14,128 b. $13,374
c. $12,873 d. $11,992

Answer: d. $11,992

Given:
D = 900 P = $205/barrel
Cc = 424.60 Co = $160
Discounted price of $ 190/barrel with min order of 300

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Solution:
At regular price: At discounted price:

Qopt = 2CoD Qopt = 300

Cc

= 2 (160) (900) Tc = 160 (900) + 24.6 (300) + 190 (900)

24.16 300 2

= 108.2 ≈ 108

Tc = CoD + Cc Qopt + PD Tc = $ 175,170

Qopt 2

Tc = 160 (900) + 24.6 (108) + 205 (900)

108 2

= $187,161.73

☺The bar should take the discount with a difference of $ 11,992 to the regular price

35. The bookstore at Aviba University purchases sweatshirts emblazoned with the school name and logo
from the vendor. The vendor sells the sweatshirt to the store for $38 apiece. The cost to the
bookstore for placing an order is $120, and the annual carrying cost is 25 percent of the cost of a
sweatshirt will be sold during the year. The vendor has offered the bookstore the following volume
discount schedule:

Order size Discount

1 – 299 0%
300 – 499 2%
500 – 799 4%
800+ 5%

The bookstore manager wants to determine the bookstore’s optimal order quantity given this quantity
discount information.

a. 1 – 299 b. 300 – 499

c. 500 – 799 d. 800+

Answer: c. 500 – 799

Given:
P = $38 D = 1,700
Co = 120 Cc = 25% price of the sweatshirt

Solution:

Cc (0%) = (.25) (38)

= 9.5

Qopt = 2 (120) (1,700) Tc = 120 (1,700) + 9.5 (207.24) + 38(1,700)

9.5 207.24 2

= 207.24 ≈ 207 = $66,568.76

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Cc (2%) = (.25) [38-(38*.02)] Tc= 120 (1,700) + 9.31(300) + 37.24 (1,700)

= 9.31 300 2
= $ 65,384.5

Cc (4%) = (.25) [38-(38*.04)] Tc = 120 (1,700) + 9.12 (500) + 36.48 (1,700)

= 9.12 500 2
= $ 64,704

Cc (5%) = (.25) [38-(38*.05)] Tc = 120 (1,700) + 9.025 (800) + 36.1 (1,700)

= 9.025 800 2
= $ 65,235

☺The bookstore manager should choose the 500-799 brackets having the lowest total cost.

36. Determine the optimal order quantity of sweatshirt and total annual cost in Problem No. 49 if the
carrying cost is a constant $8 per shift per year.

a. 1 – 299 b. 300 – 499

c. 500 – 799 d. 800+

Answer: c. 500 – 799

Given:
P = $38 D = 1700
Co = $120 Cc = $ 8

Solution:

At (0%)
Qopt = 2 (120) (1,700) Tc = 120 (1,700) + 8 (226) + 38 (1,700)
8 226 2

= 22.5 ≈ 226 = $66,406.65

At (2%)
Qopt = 300 Tc = 120 (1,700) + 8 (300) + 37.24 (1,700)
P = [38-(38*.02)] 300 2
= 37.24 = $65,188

At ( 4%)
Qopt = 500
P = [38-(38*.04)] Tc = 120 (1,700) + 8 (500) + 36.48 (1,700)
= 36.48 500 2
= $64,424

At (5%)
Qop = 800 Tc = 120 (1,700) + 8 (800) + 36.1 (1,700)
P = [38-(38*.05)] 800 2
=36.1 = $64,825

☺ 500 - 799 is the optimal order quantity with the total annual cost of $64,424

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37. The office manager for the Breganza Life Insurance Company orders letterhead stationery from an
office products firm in boxes of 500 sheets. The company uses 6,500 boxes per year. Annual
carrying cost are $3 per box, and ordering costs are $28. The following supply company provides the
following discount price:

Order quantity (boxes) Price per box

200 – 999 $ 16
1,000 – 2,999 14
3,000 – 5,999 13
6,000 + 12

Determine the optimal order quantity at the least total annual inventory cost.

a. 200 – 999 b. 1,000 – 2,999

c. 3,000 – 5,999 d. 6,000+

Answer: d. 6,000+

Given:

D = 6,000 Co = $28
Cc = $ 3/box

Solution:

Qopt = 2 (28) (6,500)

3

Qopt = 348.33 boxes

At P = 16
Tc = 28 (6500) + 3 (348.33) + 16 (6,500)
348.33 2
Tc = $105,044.988

At P = 14
Tc = 28 (6,500) + 3 (1,000) + 14 (6,500)
1,000 2
Tc = $92,682

At P = 13
Tc = 28 (6,500) + 3 (3,000) + 13 (6,500)
3,000 2
Tc = $89,060.66

At P = 12
Tc = 28 (6,500) + 3 (6,000) + 12 (6,500)
6,000 2
Tc = $87,030.33

☺ The manager should order 6,000 with the lowest total annual inventory cost $ 87,030.33

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38. Determine the optimal quantity and total annual inventory cost for boxes of stationery in Problem No.
37 if the carrying cost is 20 percent of the price of a box of stationery.

a. 200 – 999 b. 1,000 – 2,999

c. 3,000 – 5,999 d. 6,000+

Answer: d. 6,000+

Given:
D = 6,500 Cc = 20% of the price
Co = $28

Solution:

At P = 16
Qopt = 2 (28) (6,500) Tc = 28 (6,500) + 3.2 ( 337) + 16 (6,500)
3.2 337 2

= 337.27 ≈ 337 = $105,021.40

At P =14
Qopt = 1,000 Tc = 28 (6,500) + 2.8 (1,000) + 14 (6,500)
Cc = (.20*14) 1,000 2
= 2.8 = $92,563.5

At P = 13
Qopt = 3,000 Tc = 28 (6,500) + 2.6 (3,000) + 13 (6,500)
Cc = (.20*13) 3,000 2

= 2.6 = $88,454.17

At P = 12
Qopt = 6,000 Tc = 28 (6,500) + 2.4 (6,000) + 12 (6,500)
Cc = (.20*12) 6,000 2
Cc = 2.4 = $85,227.08

☺ The optimal order quantity is 6,000 with the lowest total annual inventory of $ 85,227.08

39. Padilla Electronics stocks and sells a particular brand of microcomputer. It costs the firm $450 each
time it places an order with the manufacturer for the microcomputers. The cost of carrying one
microcomputer in inventory for a year is $170. The store manager estimates that total annual demand
for the computers will be 1,200 units, with a constant demand rate throughout the year. Orders are
received within the minutes after placement from a local warehouse maintained by the manufacturer.
The store policy is never to have stock outs of the microcomputers. The store is open for business
everyday of the rear except Christmas day. Determine the optimal order quantity per order.

a. 75 b. 80
c. 85 d. 90

Answer: b. 80

Given: Co = $450
Cc = $170
D = 1,200 units

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364 days open

Solution:

Qopt = 2 Co D
Cc

= 2(450)(1200)
170

= 79.71 = 80 units

40. In reference to Problem No. 39, determine the minimum total annual inventory cost.

a. $14,150 b. $13,550
c. $12,350 d. $11,950

Answer: b. $13,550

Solution:

TC = Co D + Cc Q
Q 2

= (450)(1200) + (170)(79.71)
79.71 2

= $13,549.91 = $13,550

41. In reference to Problem No. 39, determine the number of orders per year.

a. 15 b. 20
c. 25 d. 30

Answer: a. 15

Solution:
D = Number of orders per year
Qopt

1200 = 15.05 = 15 orders per year

79.71

42. In reference to Problem No. 39, determine the time between orders in working days.

a. 20 b. 17
c. 14 d. 11

Answer: c. 14

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Solution:

364 = 14.19 = 14 store days

15.05

43. A firm is faced with the attractive situation in which it can obtain immediate delivery of an item it stocks
for retail sale. The firm has therefore not bothered to order the item in any systematic way. However,
recently profits have been squeezed due to increasing competitive pressures, and the firm has
retained a management consultant to study its inventory management. The consultant has
determined that the various cost associated with making an order for the item stocked are
approximately $30 per order. She has also determined that the costs of carrying the item in inventory
amount to approximately $20 per unit per year (primarily storage costs and forgone profit on
investment in inventory). Demand for the item is reasonably constant over time, and the forecast is for
19,200 units per year. When an order is placed for the item, the supplier immediately delivers the
entire order to the firm. The firm operates 6 days a week plus a few Sundays, or approximately 320
days per year. Determine the optimal order per year.

a. 240 b. 270
c. 250 d. 260

Answer: a. 240

Given: Co = $30
Cc = $20
D = 19,000 units
320 days per year

Solution:

Qopt = 2 Co D
Cc

= 2(30)(19,200)
20

= 240 units

44. In reference to Problem No. 43, determine the total annual inventory cost.

a. $2,900 b. $3,700
c. $4,800 d. $5,200

Answer: c. $4,800

Solution:

TC = Co D + Cc Q
Q 2

= (80)(19,200) + (20)(240)
240 2

= $4,800

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45. In reference to Problem No. 43, determine the optimal number of orders to place per year.

a. 50 b. 60
c. 70 d. 80

Answer: d. 80

Solution:

D = Number of orders per year

Qopt

19,200 = 80 orders per year

240

46. In reference to Problem No. 43, determine the number of operating days between orders, based on
the optimal ordering.

a. 3 b. 4
c. 5 d. 6

Answer: b. 4

Solution:

320 = 4 days
80

47. The Gonzales Jeans Company purchases denim from Hipolito Textile Mills. The Gonzales uses
35,000 yards of denim per year to make jeans. The cost of ordering denim from the textile company is
$500 per order. It costs Western $0.35 per yard annually to hold a yard from denim in inventory.
Determine the optimal number of yards of denim the company should order.

a. 10,000 b. 12,000
c. 14,000 d. 16,000

Answer: a. 10,000

Given: Co = $500
Cc = $0.35
D = 35,000 yards

Solution:

Qopt = 2 Co D
Cc

= 2(500)(35,000)
0.35

= 10,000 yards

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48. In reference to Problem No. 47, determine the minimum total inventory cost.

a. $2,500 b. $3,500
c. $4,500 d. $5,500

Answer: b. $3,500

TC = Co D + Cc Q
Q 2

= (500)(35,000) + (0.35)(10,000)
10,000 2

= $3,500

49. In reference to Problem No. 47, determine the optimal number of orders per year and the optimal time
between orders.

a. 3 orders, 102 days b. 4 orders, 102 days

c. 3 orders, 104 days d. 4 orders, 104 days

Answer: d. 4 orders, 104 days

Solution:

D . = Number of orders per year

Qopt

35,000 = 3.5 = 4 orders per year

10,000

365 = 104.29 = 104 days

3.5

50. The Osila Book Company purchases paper from the Biscocho Paper Company. Osila produces
magazines and paperbacks that require 1,215,000 yards of paper per year. The cost per order for the
company is $1,200 while the cost of holding 1 yard of paper in inventory is $0.08 per year. Determine
the Economic Order Quantity.

a. 180,714 b. 185,917
c. 190,919 d. 200,302

Answer: c. 190,919

Given: Co = $1,200
Cc = $0.08

D = 1,215,000 units
320 days per year

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Solution:

Qopt = 2 Co D
Cc

= 2(1,200)(1,215,000)
0.08

= 190,918.83 = 190,919 units

51. In reference to Problem No. 50, determine the minimum total annual cost.

a. $12,972 b. $13,587
c. $14,741 d. $15,274

Answer: d. $15,274

Solution:

TC = Co D + Cc Q
Q 2

= (1,200)(1,215,000) + (0.08)(190,918.83)
190,918.83 2

= $15,273.51 = $15,274

52. In reference to Problem No. 50, determine the optimal number of orders per year and time between
orders.

a. 10 orders, 60 days b. 8 orders, 59 days

c. 7 orders, 58 days d. 6 orders, 57 days

Answer: d. 6 orders, 57 days

Solution:

D . = Number of orders per year

Qopt

1,215,000 = 6.36 = 6 orders per year

190,918.83

365 = 57.39 = 57 days

6.36

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53. The Ligon Bakery produces fruit pies for freezing and subsequent sale. The bakery, which operates 5
days a week, 52 weeks a year, can produce pies at the rate of 64 pies per day. The bakery sets up
the pie-production operation and produces until a predetermined number (Q) have been produced.
When not producing pies, the bakery uses its personnel and facilities for producing other bakery
items. The setup cost for a production run of fruit pies is $500. The cost of holding frozen pies in
storage is $5 per pie per year. The annual demand for frozen fruit pies, which is constant over time, is
5,000 pies. Determine the optimum production quantity (Q).

a. 1,196 b. 1,352
c. 2,239 d. 2,474

Answer: a. 1,196

Given: Co = $500
Cc = $5
D = 5,000 pies
d = (5,000 260) = 19.23 pies per day
P = 64 pies per day

Solution:

a.) Qopt = 2 Co D .
Cc 1 - d
p

= 2(500)(5,000)
5 1-19.23
64

= 1,195.63 = 1,196

54. In reference to Problem No. 53, determine the total annual inventory cost.

a. $3,071 b. $4,182
c. $5,243 d. $5,284

Answer: b. $4,182

Solution:

TC = Co D + Cc Q 1 - d
Q 2 p

= ($500)(5,000) + (5)(1,195.63) 1 – 19.23

1,195.63 2 64

= $4,181.90 = $4,182

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55. In reference to Problem No. 53, determine the optimum number of production runs per year.

a. 2 b. 4
c. 6 d. 8

Answer: b. 4

Solution:

D . = Number of orders per year

Qopt

5,000 = 4.18 = 4 runs per year

1,195.63

56. In reference to Problem No. 53, determine the optimum cycle time (time between run starts)

a. 39 b. 48
c. 65 d. 74

Answer: d. 74

Solution:

311 days = 74.37 = 74 (optimal cycle time)

4.18

57. In reference to Problem No. 53, determine the run length in working days.

a. 19 b. 21
c. 23 d. 25

Answer: a. 19

Solution:

Q = 1,195.23 = 18.68 = 19 days per order

p 64

58. The Quitain Bicycle Shop operates 364 days a year, closing only on Christmas Day. The shop pays
$300 for a particular bicycle purchased from the manufacturer. The annual holding cost per bicycle is
estimated to be 25 percent of the dollar value of inventory. The shop sells an average of 25 bikes per
week. The ordering cost for each order is $100. Determine the optimal order quantity and the total
minimum cost.

a. 48 at $5,623 b. 53 at $4,972
c. 59 at $4,416 d. 62 at $5,183

Answer: c. 59 at $4,416

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Given: Co = $100
Cc = 300 x 0.25 =75
D = 1,300

Solution:

Qopt = 2 Co D
Cc

= 2(100)(1300)
75

= 58.8 = 59

TC = Co D + Cc Q
Q 2

= (100)(1300) + (75)(58.8)
58.8 2

= $4,415.88 = $4,416

59. The Lanuza Petroleum Company uses a highly toxic chemical in one of its manufacturing processes.
It must have the product delivered by special cargo trucks designed for safe shipment of chemicals.
As such, ordering (and delivery) costs are relatively high, at $2,600 per order. The chemical product
is packaged in 1-gallon plastic containers. The cost of holding the chemical in storage is $50 per
gallon per year. The annual demand for the chemical, which is constant overtime, is 2,000 gallons per
year. The lead-time from time of order placement until receipt is 10 days. The company operates 310
working days per year. Compute the optimal order quantity and the total minimum cost.

a. 456 at $22,804 b. 562 at $23,782

c. 612 at $24,549 d. 745 at $25,103

Answer: a. 456 at $22,804

Given: Co = $2,600
Cc = $ 50
D = 2,000
L = 10 days
310 days per year

Solution:

Qopt = 2 Co D
Cc

= 2(2,600)(2,000)
50

= 456.07 = 456

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TC = Co D + Cc Q
Q 2

= (2,600)(2,000) + (50)(456.07)
456.07 2

= $22,803.51 = $22,804

60. In reference to Problem No. 59, determine the reorder point.

a. 35 b. 47
c. 52 d. 64

Answer: d. 64

Solution:

R = dL

R = (64.52) x (10) = 64.52 = 64 gal

61. The Sandico Supermarket stocks Munchies Cereal. Demand for munchies is 4,000 boxes per year
(365 days). It costs the store $60 per order of munchies, and it costs $0.80 per box per year to keep
the cereal in stock. Once an order for munchies is placed, it takes 4 days to receive the order from a
food distributor. Determine the optimal order size and the minimum total annual inventory cost.

a. 57 at $805 b. 62 at $780
c. 75 at $620 d. 84 at $560

Answer: c. 75 at $620

Given: Co = $60
Cc = $0.80
D = 4,000
L = 4 days

Solutions:

Qopt = 2 Co D
Cc

= 2(60)(4,000)
0.80

= 774.60 = 775

TC = Co D + Cc Q
Q 2

= (60)(4,000) + (0.80)(774.60)
774.60 2

= $619.68 = $620

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62. In reference to Problem No. 61, determine the reorder point.

a. 38 b. 44
c. 56 d. 62

Answer: b. 44

Solution:

R = d(L)

R = (10.96) x (4) = 43.84 = 44 boxes

63. The Tenorio Dairy makes cheese to supply to stores in its area. The dairy can make 250 pounds of
cheese per day, and the demand at area stores is 180 pounds per day. Each time the dairy makes
cheese, it costs $125 to set up the production process. The annual cost of carrying a pound of
cheese in a refrigerated storage area is $12. Determine the optimal size and the total annual
inventory cost.

a. 2,211 at $7,429 b. 3,244 at $7,955

c. 4,010 at $7,521 d. 5,122 at $7,602

Answer: a. 2,211 at $7,429

Given: Co = $125
Cc = $12
D = 65,700 units
d = 180 lbs/day
p = 250 lbs/day

Solution:

Qopt = 2 Co D .
Cc 1 - d
p

= 2(125)(65,700)
12 1-180
250

= 2,210.97 = 2,211

TC = Co D + Cc Q 1 - d
Q 2 p

= (125)(65,700) + (12)(2,210.97) 1 – 180

2,210.97 2 250

= $7,428.86 = $7,429

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64. The Rebueno Water Ski Company is the world’s largest producer of water skis. As you might suspect,
water skis exhibit a highly seasonal demand pattern, with peaks during the summer months and
valleys during the winter months. Given the following costs and quarterly sales forecasts, use the
transportation method to design a production plan that will economically meet demand. What is the
cost of the plan?

Quarter Sales Forecast

1 50,000
2 150,000
3 200,000
4 52,000

Inventory carrying cost $ 3.00 per pair of skis per quarter

Production per employee 1,000 pairs of skis per quarter
Regular workforce 50 workers
Overtime capacity 50,000 pairs of skis
Subcontracting capacity 40,000 pairs of skis
Cost of regular production $ 50 per pair of skis
Cost of overtime production $ 75 per pair of skis
Cost of subcontracting $ 85 per pair of skis

a. $20,520,000 b. $25,850,000
c. $28,430,000 d. $30,290,000

Answer: d. $30,290,000

Solution:

PERIOD OF USE
PERIOD OF unused
1 2 3 4 capacity
PRODUCTION capacity
0 3 6 9
beginning inventory - - - - - -
50 53 56 59
regular 50,000 - - - 0 50,000
75 78 8 84
1 overtime - 50,000 - - 0 50,000
85 88 1
91 94
subcontract - - 20,000 - 20,000 40,000
50 53 56
regular 50,000 - - 0 50,000
75 78 81
2 overtime 50,000 - - 0 50,000
85 88 91
subcontract - 40,000 - 0 40,000
50 53
regular 50,000 - 0 50,000
75 78
3 overtime 50,000 - 0 50,000
85 88
subcontract 40,000 - 0 40,000
50
regular 50,000 0 50,000
75
4 overtime 2,000 48,000 50,000
85
subcontract - 40,000 40,000
DEMAND 50,000 150,000 200,000 52,000

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PRODUCTION PLAN
ENDING
PERIOD DEMAND REGULAR OVERTIME SUBCONTRACT
INVENTORY
1 50,000 50,000 50,000 20,000 70,000
2 150,000 50,000 50,000 40,000 60,000
3 200,000 50,000 50,000 40,000 0
4 52,000 50,000 2,000 0 0
TOTAL 452,000 200,000 152,000 100,000 130,000

Total cost = 200,000 ($ 50) + 152,000 ($ 75) + 100,000 ($ 85) + 130,000 ($ 3) = $30,290,000

65. The CEO of Rebueno Water Ski from Problem No. 64 has decided to forgo the company’s policy of
guaranteed employment. Assume the cost of hiring and firing workers is $100 per worker hired and
$400 per worker fired. Try level production strategy. If necessary, allow backordering at $10 per pair
of skis per quarter. What is the cost of the plan?

a. $21,421,000 b. $23,483,300
c. $26,716,000 d. $28,835,000

Answer: b. $23,483,300

Solution:

SALES
QUARTER REGULAR BACKORDER INVENTORY WORKERS HIRED FIRED
FORECAST
1 50,000 113,000 0 63,000 113 63 0
2 150,000 113,000 0 26,000 113 0 0
3 200,000 113,000 61,000 0 113 0 0
4 52,000 113,000 0 0 113 0 0
TOTAL 452,000 452,000 61,000 89,000 63 0

Level production with backorder:

Total Cost = 452,000 ($50) + 61,000 ($10) + 89,000 ($3) + 63 ($100) = $ 23,483,300

66. In reference to Problem No. 65, use the chase demand production strategy and determine the cost of
plan.

a. $20,928,000 b. $22,674,200
c. $24,542,000 d. $26,356,000

Answer: b. $22,674,200

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Solution:

Chase Demand

SALES
QUARTER REGULAR WORKERS HIRED FIRED
FORECAST
1 50,000 50,000 50 0 0
2 150,000 150,000 150 100 0
3 200,000 200,000 200 50 0
4 52,000 52,000 52 0 148
TOTAL 452,000 452,000 150 148

Total Cost = 452,000 ($50) + 100 ($150) + 148 ($400) = $ 22,674,200

67. Hong Apparel, manufacturer of a famous swimwear line, needs help planning production for the next
year. Demand for swimwear follows a seasonal pattern, as shown here. Given the following costs and
demand forecasts, use as a strategy the level production with overtime and subcontracting and
determine the cost of the plan.

MONTH DEMAND FORECAST

January 1,000
February 500
March 500
April 2,000
May 3,000
June 4,000
July 5,000
August 3,000
September 1,000
October 500
November 500
December 3,000

Beginning workforce 8 workers

Subcontracting capacity unlimited
Overtime capacity 2,000 units/month
Production rate per worker 250 units/month
Regular wage rate $ 15 per unit
Overtime wage rate $ 25 per unit
Subcontracting wage rate $ 30 per unit
Hiring cost $ 100 per worker
Firing cost $ 200 per worker
Holding cost $ 0.50 per unit/month
Backordering cost $ 10 per unit/month
No beginning inventory

a. $725,000 b. $613,000
c. $529,000 d. $448,000

Answer: d. $448,000

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Solution:

Level production with overtime and subcontracting:

MONTH DEMAND REGULAR OVERTIME SUBCON INVENTORY WORKERS HIRED FIRED

January 1,000 2,000 1,000 8 0 0
February 500 2,000 2,500 8 0 0
March 500 2,000 4,000 8 0 0
April 2,000 2,000 4,000 8 0 0
May 3,000 2,000 3,000 8 0 0
June 4,000 2,000 1,000 8 0 0
July 5,000 2,000 2,000 0 8 0 0
August 3,000 2,000 1,000 0 8 0 0
September 1,000 2,000 1,000 8 0 0
October 500 2,000 2,500 8 0 0
November 500 2,000 4,000 8 0 0
December 3,000 2,000 3,000 8 0 0
TOTAL 24,000 24,000 3,000 - 26,000 0 0

Total cost = 24,000 ($ 15) + 3,000 ($ 25) + 26,000 ($ 0.50) = $ 448,000

68. In reference Problem No. 67, use as a strategy the level production with backorders as needed and
determine the cost of this plan.

a. $403,250 b. $524,620
c. $611,460 d. $718,500

Answer: a. $403,250

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Solution:

Level production with backorders as needed:

MONTH DEMAND REGULAR BACKORDER INVENTORY WORKERS HIRED FIRED

January 1,000 2,000 1,000 8 0 0
February 500 2,000 2,500 8 0 0
March 500 2,000 4,000 8 0 0
April 2,000 2,000 4,000 8 0 0
May 3,000 2,000 3,000 8 0 0
June 4,000 2,000 1,000 8 0 0
July 5,000 2,000 0 8 0 0
August 3,000 2,000 1,000 0 8 0 0
September 1,000 2,000 2,000 0 8 0 0
October 500 2,000 500 0 8 0 0
November 500 2,000 0 1,000 8 0 0
December 3,000 2,000 0 0 8 0 0
TOTAL 24,000 24,000 3,500 16,500 0 0

Total cost = 24,000 ($ 15) + 3,500 ($ 10) + 16,500 ($ 0.50) = $ 403,250

69. In reference to Problem No. 67, use as a strategy the chase demand and determine the cost of plan.

a. $532,700 b. $424,200
c. $367,600 d. $288,300

Answer: c. $367,600

Solution: Chase demand

MONTH DEMAND REGULAR WORKERS HIRED FIRED

January 1,000 1,000 4 0 4
February 500 500 2 0 2
March 500 500 2 0 0
April 2,000 2,000 8 6 0
May 3,000 3,000 12 4 0
June 4,000 4,000 16 4 0
July 5,000 5,000 20 4 0
August 3,000 3,000 12 0 8
September 1,000 1,000 4 0 8
October 500 500 2 0 2
November 500 500 2 0 0
December 3,000 3,000 12 10 0
TOTAL 24,000 24,000 28 24

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Total Cost = 24,000 ($ 15) + 28 ($ 100) + 24 ($ 200) = $ 367,600

70. Candelaria Press publishes textbooks for the college market. The demand for college textbooks is
high during the beginning of each semester and then tapers off during the semester. The
unavailability of books can cause a professor to switch adoptions, but the cost of storing books and
their rapid obsolescence must also be considered. Given the demand and cost factors shown here,
use the transportation method to design an aggregate production plan for Candelaria Press that will
economically meet demand. What is the cost of the production plan?

MONTH DEMAND FORECAST

February – April 5,000
May – June 10,000
August – October 30,000
November - January 25,000

Regular capacity per quarter 10,000 books

Overtime capacity per quarter 5,000 books
Subcontracting capacity per quarter 10,000 books
Regular production rate $ 20 per book
Overtime production rate $ 30 per book
Subcontracting production rate $ 35 per book
Holding cost $ 2.00 per book
No beginning inventory

a. $1,650,000 b. $1,800,000
c. $1,750,000 d. $1,900,000

Answer: c. $1,800,000

Solution:

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PRODUCTION PLAN
ENDING
MONTHS DEMAND REGUALR OVERTIME SUBCONTRACT
INVENTORY
February-
5,000 10,000 5,000 0 10,000
April
May-July 10,000 10,000 5,000 0 15,000
August-
30,000 10,000 5,000 0 0
October
November-
25,000 10,000 5,000 10,000 0
January
TOTAL 70,000 40,000 20,000 10,000 25,000

Total cost = 40,000 ($ 20) + 20,000 ($ 30) + 10,000 ($ 35) + 25,000 ($ 2) = $ 1,800,000

71. Bautista’s Empanada is a popular food item during the cold months, but it is marginal in other months.
Use the following demand forecasts to determine the cost of plan if production planning strategy on
level production over the twelve months is used.

MONTH DEMAND FORECAST

March
April 2,000
May 1,000
June 1,000
July 1,000
August 1,000
September 1,500
October 2,500
November 3,000
December 9,000
January 7,000
February 4,000
3,000

No backordering
Overtime capacity per month regular production
Subcontracting capacity per month unlimited
Regular production cost $ 30 per pallet
Overtime production cost $ 40 per pallet
Subcontracting production cost $ 50 per pallet
Holding cost $ 2 per pallet
No beginning inventory
Beginning workforce 10 workers
Production rate 200 pallet per worker per month
Hiring cost $ 5,000 per worker
Firing cost $ 8,000 per worker

a. $1,197,000 b. $1,232,000
c. $1,341,000 d. $1,475,000

Answer: b. $1,232,000

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Solution: Level production over the twelve months

MONTH DEMAND REGULAR INVENTORY WORKERS HIRED FIRED

March 2,000 3,000 1,000 15 5 0
April 1,000 3,000 3,000 15 0 0
May 1,000 3,000 5,000 15 0 0
June 1,000 3,000 7,000 15 0 0
July 1,000 3,000 9,000 15 0 0
August 1,500 3,000 10,500 15 0 0
September 2,500 3,000 11,000 15 0 0
October 3,000 3,000 11,000 15 0 0
November 9,000 3,000 5,000 15 0 0
December 7,000 3,000 1,000 15 0 0
January 4,000 3,000 0 15 0 0
February 3,000 3,000 0 15 0 0
TOTAL 36,000 36,000 63,500 5 0

Total cost = 36,000 ($ 30) + 63,500 ($ 2) + 5 ($ 5,000) = $ 1,232,000

72. In reference to Problem No. 71, use a strategy to produce and meet the demand each month and
absorb variations in demand by changing the size of the workforce to determine the cost of plan.

a. $1,560,000 b. $1,602,000
c. $1,722,000 d. $1,850,000

Answer: a. $1,560,000

Solution: Produce to meet demand each month. Absorb variations in demand by changing the size of the
workforce.

MONTH DEMAND REGULAR WORKERS HIRED FIRED

March 2,000 2,000 10 0 0
April 1,000 1,000 5 0 5
May 1,000 1,000 5 0 0
June 1,000 1,000 5 0 0
July 1,000 1,000 5 0 0
August 1,500 1,500 8 3 0
September 2,500 2,500 13 5 0
October 3,000 3,000 15 2 0
November 9,000 9,000 45 30 0
December 7,000 7,000 35 0 10
January 4,000 4,000 20 0 15
February 3,000 3,000 15 0 5
TOTAL 36,000 36,000 40 35

Total cost = 36,000 ($ 30) + 40 ($ 5,000) + 35 ($ 8,000) = $ 1,560,000

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73. In reference to Problem No. 71, use a strategy to keep the workforce at its current level and
supplement with overtime and subcontracting as necessary to determine the cost of plan.

a. $1,571,000 b. $1,453,000
c. $1,391,000 d. $1,293,000

Answer: d. $1,293,000

Solution: Keep the workforce at its current level. Supplement with overtime and subcontracting as
necessary.

MONTH DEMAND REGULAR OVERTIME SUBCON INVENTORY WORKERS HIRED FIRED

March 2,000 2,000 0 10 0 0
April 1,000 2,000 1,000 10 0 0
May 1,000 2,000 2,000 10 0 0
June 1,000 2,000 3,000 10 0 0
July 1,000 2,000 4,000 10 0 0
August 1,500 2,000 4,500 10 0 0
September 2,500 2,000 4,000 10 0 0
October 3,000 2,000 3,000 10 0 0
November 9,000 2,000 2,000 2,000 0 10 0 0
December 7,000 2,000 2,000 3,000 0 10 0 0
January 4,000 2,000 2,000 0 10 0 0
February 3,000 2,000 1,000 0 10 0 0
TOTAL 36,000 24,000 7,000 5,000 21,500 0 0

Total cost = 24,000($ 30) + 7,000 ($ 40) + 5,000 ($ 50) + 21,500 ($ 2) = $1,293,000

74. The Palanca Company produces two products, A and B, that are made from components C and D.
Given the following product structures, master scheduling requirements, and inventory information,
determine when order should be released for product A and the size of the order.

Product On Hand Scheduled Lot Size Gross

Receipts Requirements
A 10 0 1 100, period 8
B 5 0 1 200, period 6
C 140 0 150 -
D 200 250, period 2 250 -

Product Structure Diagram:

A B
LT = 3 LT = 2 Level 0

C(3) D(2) D(3)

LT = 3 LT = 3 LT = 3
Level 1

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a. 150, period 6 b. 100, period 8

c. 90, period 5 d. 80, period 7

Answer: c. 90, period 5

Solution:

Item: A Period
LCC: 0
Lot Size: 1 PD 1 2 3 4 5 6 7 8
LT:3
Gross 100
Requirements
Scheduled
Receipts
Projected On 10 10 10 10 10 10 10 10 0
Hand
Net 90
Requirements
Planned 90
Order
Receipts
Planned 90
Order
Releases

75. In reference to Problem No. 74, determine when order should be released for product B and the size
of the order.

a. 250, period 2 b. 195, period 4

c. 100, period 6 d. 90, period 8

Answer: b. 195, period 4

Solution:

Item: B Period
LCC: 0
Lot Size: 1 PD 1 2 3 4 5 6 7 8
LT:2
Gross 200
Requirements
Scheduled
Receipts
Projected On 5 5 5 5 5 5 0
Hand
Net 195
Requirements
Planned 195
Order
Receipts
Planned 195
Order
Releases

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76. In reference to Problem No. 74, determine when order should be released for product C and the size
of the order.

a. 250, period 2 b. 195, period 4

c. 100, period 3 d. 150, period 1

Answer: d. 150, period 1

Solution:

Item: C Period
LCC: 1
Lot Size: 150 PD 1 2 3 4 5 6 7 8
LT:4
Gross 270
Requirements (90 x 3)
Scheduled
Receipts
Projected On 140 140 140 140 140 20 20 20 20
Hand
Net 130
Requirements
Planned 150
Order
Receipts
Planned 150
Order
Releases

77. In reference to Problem No. 74, determine when order should be released for product D and the size
of the order.

a. 250, period 2 & 250, period 3 b. 500, period 1 & 250, period 2
c. 250, period 3 & 500, period 4 d. 500, period 5 & 250, period 6

Answer: a. 250, period 2 & 250, period 3

Solution:

Item: D Period
LCC: 1
Lot Size: 250 PD 1 2 3 4 5 6 7 8
LT:4
Gross 585 180
Requirements (195 x 3) (90 x 2)
Scheduled 250
Receipts
Projected On 200 200 450 450 115 185 20 20 20
Hand
Net 135 65
Requirements
Planned 250 250
Order
Receipts
Planned 250 250
Order
Releases

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78. Given the following MRP matrix, what is the entry value for X?

Item: E Period
LCC: 1
Lot Size: 50 PD 1 2 3 4 5 6 7 8
LT:2
Gross 20 30 50 50 60 90 40 60
Requirements
Scheduled 50
Receipts
Projected On 40 X
Hand
Net Y
Requirements
Planned
Order
Receipts
Planned Z
Order
Releases

a. 20 b. 40
c. 50 d. 70

Answer: b. 40

Solution:

Item: E Period
LCC: 1
Lot Size: 50 PD 1 2 3 4 5 6 7 8
LT:2
Gross 20 30 50 50 60 90 40 60
Requirements
Scheduled 50
Receipts
Projected On 40 20 40 X = 40
Hand
Net 10 Y
Requirements
Planned 50
Order
Receipts
Planned 50 Z
Order
Releases

79. In reference to Problem No. 78, what is the entry value for Y?

a. 20 b. 40
c. 50 d. 70

Answer: a. 20

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Solution:

Item: E Period
LCC: 1
Lot Size: 50 PD 1 2 3 4 5 6 7 8
LT:2
Gross 20 30 50 50 60 90 40 60
Requirements
Scheduled 50
Receipts
Projected On 40 20 40 40 40 30
Hand
Net 10 10 Y = 20
Requirements
Planned 50 50 50
Order
Receipts
Planned 50 50 50 Z
Order
Releases

80. In reference to Problem No. 79, what is the entry value for Z?

a. 50 b. 70
c. 100 d. 150

Answer: a. 50

Solution:

Item: E Period
LCC: 1
Lot Size: 50 PD 1 2 3 4 5 6 7 8
LT:2
Gross 20 30 50 50 60 90 40 60
Requirements
Scheduled 50
Receipts
Projected On 40 20 40 40 40 30 0 10 0
Hand
Net 10 10 20 60 40 50
Requirements
Planned 50 50 50 60 50 50
Order
Receipts
Planned 50 50 50 60 50 Z = 50
Order
Releases

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81. Referring to the following product structure diagram, how many E’s are needed for each A.

B(3) C(2) D(4)

C(5) D(3) F(2) G(5) H(2) I(3)

E(3) J(3) E(4)

a. 85 b. 110
c. 125 d. 130

Answer: c. 125

Solution:

E = (3 X 5 X 3) + (4 X 5 X 4) = 45 + 80 = 125

82. In reference to problem no. 81, how many Js are needed for two As?

a. 80 b. 100
c. 120 d. 140

Answer: c. 120

Solution:

E = (3 X 5 X 4) (2) = 120

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83. Capistrano Cans packages processed food into cans for a variety of customers. The factory has four
multipurpose cookers and canning lines that can pressure-cook, vacuum-pack, and applies labels to
just about any type of food or size of can. The processing equipment was purchased some years
apart, and some of the cookers are faster and more efficient than others. Capistrano Cans has four
orders that need to be run today for a particular customer: canned beans, canned peaches, canned
tomatoes, and canned corn. The customer is operating under a just-in-time production system and
needs the mixed order of canned food tomorrow. Capistrano Cans has estimated the number of
hours required to pressure-cook, process, and can each type of food by type of cooker as follows:

Cooker 1 2 3 4
Food
Beans 10 5 6 10
Peaches 6 2 4 6
Tomatoes 7 6 5 6
Corn 9 5 4 10

Due to time constraints imposed by lengthy changeover procedures, only one job can be assigned to
each cooker. How should the jobs be assigned to the cookers in order to process the food most
efficiently?

a. Beans-1, Peaches-2, Tomatoes-3, Corn-4 b. Beans-4, Peaches-3, Tomatoes-2, Corn-1

c. Beans-2, Peaches-1, Tomatoes-4, Corn-3 d. Beans-1, Peaches-3, Tomatoes-4, Corn-2

Answer: c. Beans-2, Peaches-1, Tomatoes-4, Corn-3

Solution:

Row Reduction:

Cooker 1 2 3 4
Food
Beans 5 0 1 5
Peaches 4 0 2 4
Tomatoes 2 1 0 1
Corn 5 1 0 6

Column Reduction:

Cooker 1 2 3 4
Food
Beans 3 0 1 4
Peaches 2 0 2 3
Tomatoes 0 1 0 0
Corn 3 1 0 5

Cover all zeros:

Cooker 1 2 3 4
Food
Beans 3 0 1 4
Peaches 2 0 2 3
Tomatoes 0 1 0 0
Corn 3 1 0 5

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Since the number of lines does not equal the number of rows, continue.
Modify the matrix:

Cooker 1 2 3 4
Food
Beans 1 0 1 2
Peaches 0 0 2 1
Tomatoes 0 3 2 0
Corn 1 1 0 3

Cover all zeros:

Cooker 1 2 3 4
Food
Beans 1 0 1 2
Peaches 0 0 2 1
Tomatoes 0 3 2 0
Corn 1 1 0 3

Make the assignments:

Cooker 1 2 3 4
Food
Beans 1 0 1 2
Peaches 0 0 2 1
Tomatoes 0 3 2 0
Corn 1 1 0 3

84. In reference to Problem No. 83, when can they complete the customer’s order?

a. 4 b. 5
c. 6 d. 7

Answer: c. 6

Cooker 1 2 3 4
Food
Beans 10 5 6 10
Peaches 6 2 4 6
Tomatoes 7 6 5 6
Corn 9 5 4 10

Beans will take 5 hours to cook, peaches will take 6 hours, tomatoes 6 hours, and corn 4 hours. Given
that the four cooker/ canning lines can operate simultaneously, we can complete the customer’s order in
6 hours.

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85. Liquido Printing Shop has four jobs waiting to be run this morning. Fortunately, they have four printing
presses available. However, the presses are of different vintage and operate at different speeds. The
approximate times (in minutes) required to process each job on each press are given next. Assign jobs to
presses so that the batch can be completed as soon as possible.

Press
Job 1 2 3 4
A 20 90 40 10
B 40 45 50 35
C 30 70 35 25
D 60 45 70 40

a. A-1, B-2, C-3, D-4 b. A-3, B-1, C-4, D-2

c. A-4, B-1, C-3, D-2 d. A-2, B-3, C-4, D-1

Answer: c. A-4, B-1, C-3, D-2

Solution:

Row reduction:

Job 1 2 3 4
A 10 80 30 0
B 5 10 15 0
C 5 45 10 0
D 20 5 30 0

Column reduction:

Job 1 2 3 4
A 5 75 20 0
B 0 5 5 0
C 0 40 0 0
D 15 0 20 0

Cover all zeroes:

Job 1 2 3 4
A 5 75 20 0
B 0 5 5 0
C 0 40 0 0
D 15 0 20 0

The number of lines equals the number of rows, so this is the final solution. Make assignments:

Job 1 2 3 4
A 5 75 20 0
B 0 5 5 0
C 0 40 0 0
D 15 0 20 0

Assign job A to press 4, job B to press 1, job C to press 3, and job D to press 2.

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86. In reference to Problem No. 85, when can the entire batch be completed?

a. 35 b.45
c. 70 d. 90

Answer: b. 45

Solution:

Job 1 2 3 4
A 20 90 40 10
B 40 45 50 35
C 30 70 35 25
D 60 45 70 40

Since the jobs can be run concurrently, the entire batch will be completed by the maximum completion
time of the individual jobs, or job D’s time of 45 minutes.

87. Today is the morning of September 1. Because of the approaching holiday season, Mr. Cuenco is
scheduled to work 7 days a week for the next 2 months. September’s work for Mr. Cuenco consists
of five jobs, A, B, C, D, E. Job A takes 5 days to complete and is due September 10, job B takes 10
days to complete and is due September 15, job C takes 2 days to process and is due September 5,
job D takes 8 days to process and is due September 12, and job E, which takes 6 days to process, is
due September 8.

What is the average completion time if you sequence the jobs by First-Come, First-Serve (FCFS)?

a. 15.00 b. 16.40
c. 17.80 d. 18.60

Answer: d. 18.60

Solution:

FCFS Start Time Processing Completion Due Time Tardiness

Sequence Time Time
A 0 5 5 10 0
B 5 10 15 15 0
C 15 2 17 5 12
D 17 8 25 12 13
E 25 6 31 8 23
Total 93 48
Average 93/5 = 18.60 48/5 = 9.6

88. In reference to Problem No. 87, what is the average tardiness if you sequence the jobs by earliest
due date (DDATE)?

a. 5.6 b. 6.0
c. 6.8 d. 9.6

Answer: a. 5.6

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Solution:

DDATE Start Time Processing Completion Due Time Tardiness

Sequence Time Time
C 0 2 2 5 0
E 2 6 8 8 0
A 8 5 13 10 3
D 13 8 21 12 9
B 21 10 31 15 16
Total 75 28
Average 75/5 = 15.00 28/5 = 5.6

89. In reference to Problem No. 87, what is the number of jobs tardy if you sequence the jobs by
minimum slack (SLACK)?

a. 2 b. 3
c. 4 d. 5

Answer: c. 4

Solution: Slack = (due date – today’s date) – processing time

Job A = (10 – 1) – 5 = 4
Job B = (15 – 1) – 10 = 4
Job C = (5 – 1) – 2 = 2
Job D = (12 – 1) – 8 = 3
Job E = (8 – 1) – 6 = 1

SLACK Start Time Processing Completion Due Time Tardiness

Sequence Time Time
E 0 6 6 8 0
C 6 2 8 5 3
D 8 8 16 12 4
A 16 5 21 10 11
B 21 10 31 15 16
Total 82 34
Average 82/5 = 16.40 34/5 = 6.8

90. In reference to Problem No. 87, what is the maximum tardiness if you sequence the jobs by shortest
processing time (SPT)?

a. 26 b. 23
c. 17 d. 16

Answer: d. 16

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Solution:

SPT Start Time Processing Completion Due Time Tardiness

Sequence Time Time
C 0 2 2 5 0
A 2 5 7 10 0
E 7 6 13 8 5
D 13 8 21 12 9
B 21 10 31 15 16
Total 74 30
Average 74/5 = 14.80 30/5 = 6.0

91. In reference to Problem No. 87, what is the sequence of jobs if you use the smallest critical ratio (CR)
rule?

a. A-B-C-D-E b. C-E-A-D-B
c. E-C-D-A-B d. E-D-B-A-C

Answer: d. E-D-B-A-C

Solution: Critical Ratio = Time Remaining / Work Remaining

Job A = (10 – 1)/ 5 = 1.80

Job B = (15 – 1)/ 10 = 1.40
Job C = (5 – 1)/ 2 = 2.00
Job D = (12 – 1)/ 8 = 1.37
Job E = (8 – 1)/ 6 = 1.16

Sequence: Smallest to Highest CR = E-D-B-A-C

92. Today is day 4 of the planning cycle. Sequence the following jobs by FCFS and determine the
average completion time.

Job Processing Time Due Date

(in days)
A 3 10
B 10 12
C 2 25
D 4 8
E 5 15
F 8 18
G 7 20

a. 19.91 b. 21.61
c. 23.81 d. 24.71

Answer: d. 24.71

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Solution:

FCFS Start Time Processing Completion Due Time Tardiness

Sequence Time Time
A 4 3 7 10 0
B 7 10 17 12 5
C 17 2 19 25 0
D 19 4 23 8 15
E 23 5 28 15 13
F 28 8 36 18 18
G 36 7 43 20 23
Total 173 74
Average 173/7 = 24.71 74/7 = 10.6

93. In reference to Problem No. 92, what is the average tardiness if you sequence the jobs by earliest
due date (DDATE)?

a. 6.66 b. 7.86
c. 8.86 d. 9.66

Answer: c. 8.86

Solution:

DDATE Start Time Processing Completion Due Time Tardiness

Sequence Time Time
D 4 4 8 8 0
A 8 3 11 10 1
B 11 10 21 12 9
E 21 5 26 15 11
F 26 8 34 18 16
G 34 7 41 20 21
C 41 2 43 25 14
Total 184 62
Average 184/7 = 26.29 62/7 = 8.86

94. In reference to Problem No. 92, what is the number of jobs tardy if you sequence the jobs by
minimum slack (SLACK)?

a. 4 b. 5
c. 6 d. 7

Answer: d. 7

Solution: Slack = (due date – today’s date) – processing time

Job A = (10 – 4) – 3 = 3
Job B = (12 – 4) – 10 = -2
Job C = (25 – 4) – 2 = 19
Job D = (8 – 4) – 4 = 0
Job E = (15 – 4) – 5 = 6
Job F = (18 – 4) – 8 = 6

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Job G = (20 – 4) – 7 = 9

SLACK Start Time Processing Completion Due Time Tardiness

Sequence Time Time
B 4 10 14 12 2
D 14 4 18 8 10
A 18 3 21 10 11
E 21 5 26 15 11
F 26 8 34 18 16
G 34 7 41 20 21
C 41 2 43 25 18
Total 197 89
Average 197/7 = 28.14 89/7 = 12.71

95. In reference to Problem No. 92, what is the maximum tardiness if you sequence the jobs by shortest
processing time (SPT)?

a. 31 b. 21
c. 17 d. 11

Answer: a. 31

Solution:

SPT Start Time Processing Completion Due Time Tardiness

Sequence Time Time
C 4 2 6 25 0
A 6 3 9 10 0
D 9 4 13 8 5
E 13 5 18 15 3
G 18 7 25 20 5
F 25 8 33 18 15
B 33 10 43 12 31
Total 119 40
Average 119/7 = 17.00 40/7 = 5.71

96. In reference to Problem No. 92, what is the sequence of jobs if you use the smallest critical ratio (CR)
rule?

a. A-B-C-D-E-F-G b. C-E-A-D-B-G-F
c. F-B-D-A-E-G-C d. G-F-E-D-B-A-C

Answer: c. F-B-D-A-E-G-C

Solution: Critical Ratio = Time Remaining / Work Remaining

Job A = (10 – 4)/ 3 = 2.00

Job B = (12 – 4)/ 10 = 0.80
Job C = (25 – 4)/ 2 = 11.00
Job D = (8 – 4)/ 4 = 1.00
Job E = (15 – 4)/ 5 = 2.20
Job F = (18 – 4)/ 8 = 0.50

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Job G = (20 – 4)/ 7 = 2.29

Sequence: Smallest to Highest CR = F-B-D-A-E-G-C

97. Zerrudo Fine Restoration has received a rush order to refinish five carousel animals – an alligator, a
bear, a cat, a deer, and an elephant. The restoration involves two major processes: sanding and
painting. Mr. Zerrudo takes care of the sanding; his son does the painting. The time required for
each refinishing job differs by the state of disrepair and degree of detail of each animal. Given the
following processing times (in hours), determine the order in which the jobs should be processed so
that the rush order can be completed as soon as possible.

Job Process 1 Process 2

A 6 8
B 11 6
C 7 3
D 9 7
E 5 10

a. B-A-C-D-E b. D-E-A-C-B
c. E-A-D-B-C d. A-D-E-B-C

Answer: c. E-A-D-B-C

Solution:

The smallest processing time is 3 hours, occurs at process 2 for job C, so we place job C to the end of
the sequence.

The next smallest is 5 hours. It occurs at process 1 for job E, so we place it to the beginning of the
sequence.

E C

The next smallest time is 6 hours. It occurs at process 1 for job A and at process 2 for job B. Thus, we
place job A as near to the beginning of the sequence and job B as near to the end.

E A B C

The only remaining is job D. It is placed in the only available slot, in the middle of the sequence.

E A D B C

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98. Satumira Car Service has five cars waiting to be washed and waxed. The time required (in minutes)
for each activity is given below. In what order should the cars be processed through the facility using the
Johnson’s rule?

Car Wash Wax

1 5 10
2 7 2
3 10 5
4 8 6
5 3 5

a. 2-1-5-4-3 b. 5-1-4-3-2
c. 3-2-4-5-1 d. 4-3-1-2-5

Answer: b. 5-1-4-3-2

Solution:

The lowest processing time is 2 minutes for waxing car 2. Since waxing is the second operation,
we place car 2 as near to the end of the sequence as possible, in last place.
The next-lowest time is 3 minutes for washing car 5. Since washing is the first operation, we
place car 5 as near to the front of the sequence as possible, in first place.
The next-lowest time is 5 minutes for washing car 1 and waxing car 3. Car 1 is scheduled in
second place, and car 3 is put in the next-to-last place (i.e. fourth). That leaves car 4 for third
place.
Sequence: 5-1-4-3-2

99. Au Princena works in a cosmetic factory filling, capping, and labeling bottles. She is asked to process
an average of 150 bottles per hour through her work cell. If one kanban is attached to every
container, a container holds 25 bottles, it takes 30 minutes to receive new bottles from the previous
workstation, and the factory uses a safety stock factor of 10 percent, how many kanbans are
needed for the bottling process?

a. 3 b. 5
c. 7 d. 9

Answer: a. 3

Given:

d = 150 bottles per hour

L = 30 minutes = 0.5 hour
S = 0.10 (150 x 0.5) = 7.5
C = 25 bottles

Solution:

dL + S (150 x 0.5) + 7.5

N = -------------------- = ------------------------------- = 3.3 = 3 kanbans or containers
C 25

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100. An assembly station is asked to process 100 circuit boards per hour. It takes 20 minutes to receive
the necessary components from the previous workstation. Completed circuit boards are placed in a
rack that will hold 10 boards. The rack must be full before it is sent on to the next workstation. If the
factory uses a safety factor of 10 percent, how many kanbans are needed for the circuit board
assembly process?

a. 2 b. 4
c. 6 d. 8

Answer: b. 4

Given:

d = 100 circuit boards per hour

L = 20 minutes = 20/60 = 0.33333 hour
S = 0.10 (100 x 0.33333) = 3.33333
C = 10 bottles

Solution:

dL + S (100 x 20/60) + 3.33

N = -------------------- = --------------------------------- = 3.67 = 4 kanbans or containers
C 10

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