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Homework 3

The document outlines Homework 3 for IOE 202 Operations Engineering & Analytics, due on November 12. It consists of four problems involving optimal order quantities, production planning, and linear programming formulations. Students are required to show all work, submit a PDF and an Excel spreadsheet, and provide detailed explanations of their calculations.

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6 views2 pages

Homework 3

The document outlines Homework 3 for IOE 202 Operations Engineering & Analytics, due on November 12. It consists of four problems involving optimal order quantities, production planning, and linear programming formulations. Students are required to show all work, submit a PDF and an Excel spreadsheet, and provide detailed explanations of their calculations.

Uploaded by

n5bm98ndz8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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IOE 202 Operations Engineering & Analytics: Homework 3

Due: Tuesday November 12 at 11:59am via Canvas

Please show all work (derivations, reasoning behind your calculations, etc.) and your answers.
When reporting a number, make sure to specify an appropriate unit, if necessary. Submit a single
PDF file to Canvas and name it uniqname hw3.pdf. If you used an Excel spreadsheet for any of the
calculations, please upload the spreadsheet with the name uniqname hw3.xlsx. Your spreadsheet
should be well commented and the write-up should explain the calculations in the spreadsheet.

Problem 1 (20 points)


Each year the Smalltown branch of a furniture store sells 30,000 dining room tables. The local
store orders tables from the company warehouse providing stock for many local branches and the
cost of doing this is $15 per table plus a fixed cost of $100 per order. Assume that the lead time
is zero. The store’s manager believes that the demand for tables can be backlogged and that the
cost of being short one table for one year is $25. The annual holding cost for inventory is 30¢ per
dollar value of inventory.

(a) What is the optimal order quantity?


(b) If the store manager orders the order quantity found in part (a), what is the maximum
shortage that will occur?
(c) At most, how many tables can the Smalltown furniture store have in stock if the optimal
ordering policy is followed?
(d) What is the average cost per year under the optimal policy?

Problem 2 (15 points)


Three years ago, Panera Bread opened a franchise on Plymouth Road. They bake their bread
fresh every morning very early before the store opens, and they don’t make more throughout the
day. A loaf costs $2 to bake and can be sold to a customer for $5. Any loaves that are leftover
at the end of the day can be donated to a local food bank and will have a $0.50 tax benefit. The
manager, Ed, has been estimating how much to bake each day based on his expert judgment.
However, the store has also been recording how many loaves of bread are ordered over the past
several months, and he would like to start using this data to determine how much to bake.
When Ed looks at the data, he notices that the number of loaves ordered on Tuesdays is uniformly
distributed between 350 and 420 loaves. How many loaves should this Panera location bake on
Tuesday mornings? Hint: the quantile function of an U (a, b) is F −1 (t) = a + t(b − a).

1
Problem 3 (30 points)
Formulate the following problem as a linear program, and solve using the Excel Solver. Report
the optimal solution and profit.
You’re working as an Industrial Engineer at Dell. Customers purchase laptops throughout the
year, but before each semester, university bookstores order large quantities to have in stock for
students and staff. The business intelligence unit just released the initial demand forecasts for
January orders in the Midwest region, and your manager, Alejandro, stopped by your office to
discuss the production plans. He’d like to know the most profitable way to fill all of the orders
and asked you to send him a report by next Thursday. He wants a breakdown of how many units
of each type of laptop the manufacturing division should plan to produce. Because it’s a draft
plan, Alejandro is fine with non-integer estimates.
They have the option to produce one of four types in the XPS product line. There are two
sizes: 13in and 15in, and both have a touchscreen and non-touchscreen option. The prices of the
non-touchscreen laptops are $800 and $900 for 13in and 15in, respectively, and the price of the
touchscreen option on either size is an additional $200. The production costs of the 13in laptop
are $600 (non-touchscreen) and $650 (touch), and the 15in laptop costs $625 (non-touch) and
$675 (touch).
The forecast predicts a total of 10,000 units to be ordered. It says 4,000 will be for 13in laptops,
2,000 will be for 15in laptops, and the remaining 4,000 units won’t have a size specified. They
predict exactly 3,000 touchscreens will be ordered but can’t say what size. Space may also be a
limiting factor - Dell has set aside 3,800 cubic feet of storage space for these orders. The boxes
for the 13in laptops take up 0.3 cubic feet, and the boxes for the 15in laptops take up 0.45 cubic feet.

Problem 4 (30 points)


Consider the following linear programming formulation:

min x + 4y
s.t 2y + x ≥ 4
4y − x ≥ −1
x≤5
x≥0
y≥0

(a) Graph all constraints and clearly identify the feasible region for the solution. Make sure to
clearly label which line on the graph corresponds to each constraint.
(b) Solve the LP using the graphical method (also called the iso-profit line method) and the
corner (extreme) point method and state the optimal solution and the optimal objective
function value.
(c) Which constraints are binding in the optimal solution?
(d) Consider removing the y ≥ 0 constraint from the problem. Does doing this change the
feasible region? Explain why or why not.

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