Chap 13-14-15 Assignment & Answers

Chap 13 (23, 24, 25, 27, 31, 32, 33, 34 ) Excel based problem: 40
COMPUTATIONAL PROBLEMS AND EXERCISES
These exercises require you to apply the formulas and methods
described in the chapter. The problems should be solved manually.
23. Keto Grocery Store sells 400 gallons of milk each month. The
average on-hand inventory is 50 gallons. What is the inventory
turnover? What does it mean?
Using equation [13.1], Inventory turnover = Sales/Average
inventory, we have
Inventory turnover = 400/50 = 8. Thus, the inventory of milk
turns over 8 times per month or about twice each week.
24. Over the past year, Keto Grocery Store had a cost of goods sold of
$24,500,000 and an average value of inventory of $1,100,500. What is
its inventory turnover? What does it mean?
Inventory turnover (IT) = Cost of goods sold /Average
inventory value (13.2)
= $24,500,000/$1,100,500 = 22.3
This means that over a year this store replenishes its inventory about
22-23 times. This performance measure is best compared to other
stores in the industry. USA grocery stores average about 13-14 turns
per year. You might also want to make the point that high volume and
low margin industries need higher turns to maintain positive cash flow.
25. A big box electronics store sells 250 65-inch televisions during the
year. The store maintains an average inventory of five units. What is
its inventory turnover? What implications does this have for inventory
management?
Using equation [13.1], Inventory turnover = Sales/Average
inventory, we have
Inventory turnover = 250/5 = 50. Thus, the inventory turns over
50 times per year, or about every week. This suggests that the store
must order and replenish its inventory from the manufacturer about
every week.
26. A manufacturer of large industrial electric motors has a cost of
goods sold of $111,690,000 and an average inventory value of
$14,609,300. What is its inventory turnover? What does it mean?
Inventory turnover (IT) = Cost of goods sold /Average inventory
value (13.2)
= $111,690,000/$14,609,000 = 7.65
This means that over a year this company replenishes its inventory
about 7-8 times. This performance measure is best compared to other
firms in the industry. This could be normal for this industry, but it could
indicate decreasing sales, extra or obsolete inventory, and poor
inventory management. This may also be a signal that the firm
struggles to make sales and a positive cash flow.
27. Bragg Johnson, materials manager at Johnson & Sons, has
determined that a certain product experienced 3.8 turns last year, with
an annual sales volume (at cost) of $975,000. What was the average
inventory value for this product last year? What would be the average
inventory level if inventory turns could be increased to 6.0?
Inventory turnover (IT) = Cost of goods sold /Average inventory
value (13.2)
3.8 = $975,000/X or X = $256,579 average inventory level last
year
6.0 = $975,000/X or X = $162,500 average inventory target level
if TT = 6

28. Andrew Manufacturing held an average inventory of $1.1 million

(raw materials, work-in-process, finished goods) last year. Its sales
were $8.0 million, and its cost of goods sold was $5.8 million. The firm
operates 260 days a year. What is the inventory days’ supply? What
target inventory level is necessary to reach a 20- and 10-day inventory
days’ supply during the next two years?

Inventory turnover (IT) = Cost of goods sold /Average inventory

value (13.2)
= $5,800,000/$1,100,000 = 5.3 inventory
turnover rate.

Cost of goods sold/day (CGS/D) = Cost of goods sold

value/Operating days per year (13.4)
CGS/D = $5,800,000/260 = $22,307.70
Inventory days’ supply (IDS) = Ave. total inventory /Cost of goods
sold per day (13.3)
IDS = $1,100,000/$22,307.70 = 49.3 days
20 = X/$22,307.70 or X = $446,154 or a total inventory reduction
of $653,846.
 10 = X/$22,307.70 or X = $223,077 or a total inventory reduction
of $876,923.

Point out to the students this is one way to set inventory

reduction targets over a planning horizon of several years.

29. Based on the following information, how many days of supply of

inventory is the firm holding (assume 250 days of operation per year)?
Interpret your answer if the industry average inventory days’ supply is
30 days.

Inventory turnover (IT) = Cost of goods sold /Average inventory

value (13.2)
= $7,200,000/$2,600,000 = 2.77 inventory turnover
rate.

Cost of goods sold/day (CGS/D) = Cost of goods sold

value/Operating days per year (13.4)
CGS/D = $7,200,000/250 = $28,800
Inventory days’ supply (IDS) = Ave. total inventory /Cost of goods
sold per day (13.3)
IDS = $2,600,000/$28,800 = 90.3 days’ supply

If the industry average days’ supply is 30 days and this firm’s IDS
is three times more, they definitely have inventory management
problems. They may also have engineering or engineering change
problems or simply accounting needs to write off obsolete inventory
from past years.

30. Claiken Incorporated is a supplier of axles for light trucks. They

held an average axle inventory of $1.6 million last year, with a cost of
goods sold of $21.0 million. What is the inventory turnover for axles?
A customer wants them to increase its inventory turnover rate to 20 by
implementing better inventory and operating practices. What average
axle inventory level is needed to meet this 20-turn target?

Inventory turnover (IT) = Cost of goods sold /Average inventory

value (13.2)
= $21,000,000/$1,600,000 = 13.13 current axle
turnover rate.

20 = $21,000,000/X or 20X = $21,000,000 or X =

$1,050,000 so need to reduce average axle
inventory by $550,000.

31. What are total purchase and oversight costs if annual demand is
1,000,000 units, the purchase price is $2.42, and the management
oversight costs to monitor and expedite the trans-Pacific shipment are
$0.16 per unit?

Procurement costs = PD = $2.42*1,000,000 units= $2,420,000

Management oversight cost = OD = $0.16*1,000,000 units =
$160,000
Total = $2,580,000

32. What is the pipeline inventory value if average daily demand is 82

units, the lead time is 20 days, and annual inventory carrying costs is
$12?

Pipeline inventory cost = dLCh = (82 units/day)*20*$12.00 =

$19,680

33. What are order cycle costs if annual demand is 8,000 units, the
order quantity is 1,000 units, and annual order cost is $97? What if the
order size changes to 500 units or 8,000 units?

Order cycle cost = Co (D/Q) = $97*(8,000/1,000) = $776

Order cycle cost = Co (D/Q) = $97*(8,000/500) = $1552
Order cycle cost = Co (D/Q) = $97*(8,000/8,000) = $97
34. What is the annual transportation cost if annual demand is
240,000 units and the cost to transship a unit is $0.80 per unit?

Transportation cost = CtD = $0.80*240,000 units = $192,000

EXCEL-BASED PROBLEMS
For these problems, you may use Excel or the spreadsheet templates in
MindTap to assist in your analysis.
40. Given the information in Exhibit 13.12 for the Edwin Company, use
the Total Supply Chain Cost Excel template to find the costs associated
with the supply chain. The order size is Q = 2,500 units and the supply
chain operates 250 days a year.

Chap 14 Ex. 26 Chap 15 Ex 24, 28, 30 Excel Based: 39

COMPUTATIONAL PROBLEMS AND EXERCISES

These exercises require you to apply the formulas and methods
described in the chapter. The problems should be solved manually.
25. The forecast demand for fudge for the next four months is 120,
160, 20, and 70 pounds.
a. What is the recommended production rate if a level strategy
is adopted with no backorders or stock outs? What is the
ending inventory for Month 4 under this plan?
To ensure no backorders or stock outs, a level production strategy
would require producing at peak demand or 160 pounds/month. Using
Equation 14.1 this would result in an inventory at the end of month 4 of
640 - (120 + 160 + 20 + 70) = 270 pounds. You might also want to ask
students what's wrong with this solution. Answer? High inventory
levels!

Using Equation 14.1 we find

Production Demand Ending Inventory
Month 1 160 units 120 40
Month 2 160 units 160 40
Month 3 160 units 20 180
Month 4 160 units 70 270
Average monthly inventory = 132.5 units
b. What is the level production rate with no ending inventory in
Month 4?
To ensure no ending inventory, the production rate must be (120
+ 160 + 20 + 70)/4 = 92.5 pounds/month; however, this would result in
backorders or stock outs.

26. Rapallo Corporation manufactures industrial vacuum cleaners

with forecasted sales for the next five weeks as follows: Week 1 = 2,000
units, Week 2 = 2,500, Week 3 = 3,000, Week 4 = 3,000, and Week 5 =
3,500. Beginning inventory equals 13,000 units and the firm wants to
maintain this level at the end of week 5.
a. What weekly production rate is necessary?
(2,000+2,500+3,000+3,000+3,500)/5 = 2,800 units/week
b. What is the ending inventory level over time using your answer in
part a?
 Using Equation 14.1 we have:

Week

1 2 3 4 5

Beginning 13,000 13,800 14,100 13,900 13,700

Inventory

+ 2,800 2,800 2,800 2,800 2,800

Productio
n

- Demand 2,000 2,500 3,000 3,000 3,500

= Ending 13,800 14,100 13,900 13,700 13,000

Inventory

c. Suppose management wants to reduce its inventory level to 3,000

units by the end of week 5 because the chief financial officer is upset
about the cost to carry so much inventory. How does the production
plan and rate change?
Since ending week 5 inventory must be reduced from 13,000 to
3,000 units, we need to reduce the production rate by (10,000/5 =
2,000 units/week. The revised production rate is 800 units/ week and
the ending week 5 inventory is 3,000 units. This production plan works
down existing inventory, but factory layoffs are severe. Not such a
practical plan and the operations manager must tell the financial officer.

27. Jet skis and snowmobiles are assembled by Mobile Incorporated.

Because both end-items use the same small engine, you can aggregate
demand for the engine assembly. Develop an aggregate plan that uses
a level production strategy each quarter. What is the total cost?
Assume lost sales are backordered and filled during the next quarter.
Summarize the plan, its costs, and consequences using manual
computations.
Chap 15 Ex 24, 28, 30 Excel Based: 39

COMPUTATIONAL PROBLEMS AND EXERCISES

These exercises require you to apply the formulas and methods
described in the chapter. The problems should be solved manually.

23. A hospital emergency room needs the following numbers of

nurses.

Each nurse should have two consecutive days off. How many full-
time nurses are required, and what is a good nurse schedule?

Notice this is a difficult target-staffing pattern ranging from a

minimum of 4 to 8 nurses. There exist many alternate solutions but
here is one. With 8 full-time nurses this schedule exceeds all minimum
staffing requirements.

Step M T W T F S S
1 4 3 2 4 7 8 5
2 3 3 2 3 6 7 4
3 2 3 2 2 5 6 3
4 1 2 2 2 4 5 2
5 1 2 1 1 3 4 1
6 0 1 1 1 2 3 0
7 0 0 0 0 1 2 0
 8 0 0 0 0 0 1 0

Capacity Check 5 4 3 5 8 8 7
Min Req'd 4 3 2 4 7 8 5
+/- FTE +1 +1 +1 +1 +1 0
+2

24. A supermarket has the following minimum personnel

requirements during the week. Each employee is required to have two
consecutive days off. How many regular employees are required, and
what is a good schedule?

Step M T W T F S S
1 3 4 5 3 5 6 5
2 3 4 4 2 4 5 4
3 2 3 4 2 3 4 3
4 1 2 3 2 3 3 2
5 1 1 2 1 2 2 2
6 1 1 1 0 1 1 1
7 0 0 1 0 0 0 0

Capacity Check 4 5 5 4 6 6 5
Min Req'd 3 4 5 3 5 6 5
+/- FTE +1 +1 0 +1 +1 0
0

Seven employees are required, and there are many other

alternative staff schedules.
25. Five jobs are to be processed on one machine. If the jobs are
processed in the FCFS order 1-2-3-4-5, compute the start time and flow
time for each job.

Job Sequence (i) Start Time (Si) Processing Time (Pi) Flow
Time (Si + Pi)
1 0 8 0 + 8 = 8 hours
2 8 3 8 + 3 = 11 hours
3 11 5 11 + 5 = 16 hours
4 16 9 16 + 9 = 25 hours
5 25 4 25 + 4 = 29 hours

26. These six jobs are to be scheduled on a single machine:

a. Suppose the jobs are processed in FCFS numerical order.

Compute the makespan, flow time for each job, and overall
average flow time.

Job Sequence (i) Start Time (Si) Processing Time (Pi) Flow
Time (Si + Pi)
1 0 100 0 + 100 = 100 min.
2 100 130 100 + 130 = 230
min.
3 230 210 230 + 210 = 440
min.
4 440 90 440 + 90 = 530 min.
5 530 150 530 + 150 = 680
min.
 6 680 80 680 + 80 = 760 min.

The makespan is 760 hours. Average flow time is 456.67.

b. In what order would the jobs be processed using the SPT rule?
Compute the average flowtime after each job is completed. Compare
this answer with your answer to part a.

Job Sequence (i) Start Time (Si) Processing Time (Pi) Flow
Time (Si + Pi)
6 0 80 0 + 80 = 80 min.
4 80 90 80 + 90 = 170 min.
1 170 100 170 + 100 = 270
min.
2 270 130 270 + 130= 400
min.
5 400 150 400 + 150 = 550
min.
3 550 210 550 + 210 = 760
min.

Average flow time is 371.67. The average flow time is reduced.

27. On Tuesday morning at 8 a.m., an IT analyst found four project

“tickets” in her inbox that arrived overnight. The estimated times to
complete the projects and the due dates requested are given below. If
the projects are processed in a FCFS order (1-2-3-4), compute the flow
time, lateness, and tardiness for each project.

Convert the due dates to minutes past 8 a.m.

 Job Due Date (Di) Processing Time (Pi) Flow Time (Fi)
Lateness (Li = Fi - Di) Tardiness [Max(0,Li)]
3 120 45 0 + 45 = 45 −75 0
5 60 20 45 + 20 = 65 5
5
1 240 90 65 + 90 = 155 -85 0
2 90 60 155 + 60 = 215 125
125

28. Five patients arrived at the radiology department in a hospital

and are waiting for X-rays.

Use the SPT rule to create a schedule. Compute the start time and
flow time for each patient.

Using SPT, the sequence would be 5-2-1-3-4

Job Sequence (i) Start Time (Si) Processing Time (Pi) Flow
Time (Si + Pi)
5 0 15 0 + 15 = 15 min.
2 15 20 15 + 20 = 35 min.
1 35 25 35 + 25 = 60 min.
3 60 30 60 + 30 = 90 min.
4 90 40 90 + 40 = 130 min.

29. A workstation has one maintenance mechanic to repair failed

machines. We can think of the mechanic as the processor (scarce
resource) and the machines awaiting repair as the jobs. Let us assume
that six machines are down, with estimated repair times given here,
and that no new machines fail.
 Compute the flow time for each job using both the FCFS rule and
the SPT rule, and compare the average flow times.

FCFS Rule
Job Sequence (i) Start Time (Si) Processing Time (Pi) Flow
Time (Ci – Ri)
1 0 10 1 + 10 = 10 hours
2 10 3 10 + 3 = 13 hours
3 13 7 13 + 7 = 20 hours
4 20 2 20 + 2 = 22 hours
5 22 9 22 + 9 = 31 hours
6 31 6 31 + 6 = 37 hours

The average flow time for these six jobs is (10 + 13 + 20 + 22 + 31 +

37)/6 = 22.167 hours. This means that the average time a machine will
be out of service is about 22 hours.

SPT Rule
Job Sequence (i) Start Time (Si) Processing Time (Pi)
Flow Time (Ci – Ri)
4 0 2 0+2=2
hours
2 2 3 2+3=5
hours
6 5 6 5 + 6 = 11
hours
3 11 7 11 + 7 = 18
hours
5 18 9 18 + 9 = 27
hours
1 27 10 27 + 10 = 37
hours
The average flow time is (2 + 5 + 11 + 18 + 27 + 37)/6 = 16.67 hours.
The average flow time is minimized.

30. Five customers brought in computers to be repaired to a small

shop. Estimated repair times (in days) and dates promised are given
below. Due dates were set based on available technicians; however,
one technician had a medical emergency and will be unavailable for at
least two weeks, so processing times were adjusted.

31. At Lynwood Manufacturing, (see Solved Problem 15.9), suppose

the dispatcher uses the least work remaining rule (LWR) instead of FNO.
Which job (job 2 or job 3) will be scheduled next on the drill press at
time 30?

If the LWR (least work remaining) rule is chosen, then we see that
job 2 has 90 minutes of work remaining, and job 3 has only 35 minutes
remaining. Therefore, job 3 would be scheduled next.

Cumulati
 ve
Cumulati
Total ve Product Ending Lost
Producti Availabili Invento
Quarter Demand Demand on ty ry Sales

1st 19,000 19,000 22,000 23,000 4,000 0

2nd 22,000 41,000 22,000 45,000 4,000 0
3rd 35,000 76,000 22,000 67,000 -9,000 9,000
4th 13,000 89,000 22,000 89,000 0 0

Producti Inventor Lost

on y Sales
Month Cost Cost Cost
$330,00 $
1st 0 12,000 $0
$330,00 $
2nd 0 12,000 $0
$330,00 $216,00
3rd 0 $ - 0
$330,00
4th 0 $ - $0

$1,560,0
Total cost 00

The level production plan carries inventory and incurs lost sales and is
not such a good plan. A chase production plan might work better but
ask you students “What additional data do you need?” Answer is layoff
and hiring costs/employee, regular time production rate/employee,
overtime costs, maximum overtime production rate/employee, and
possibly subcontracting costs. It is also assumed no part-time
employees are used. Then you can do a chase strategy and cost it out.
EXCEL-BASED PROBLEMS
For these problems, you may use Excel Solver or the spreadsheet
templates in MindTap to assist in your analysis.

39. An earth moving machine had five jobs in the same area it must
complete as soon as possible. Sequence the jobs using (a) FCFS order
1-2-3-4-5, and (b) the SPT rule. Use the Sequencing Excel template to
compute performance measures for both sequences. What sequence is
better?

FCFS sequence

SPT sequence
SPT has a lower average flow time. (Note that due date measures are
irrelevant.)