II Assignment 11IP72- Operations Management

1. Potential locations in A, B,and C cities have the cost structures as shown below for a
product whose selling price is Rs.130-00.
Locations
Fixed costs
Variable cost per year
A
150000
75
B
200000
50
C
410000
24
i.find the best economic location for an expected volume of 7000 units/yr
ii.what is the expected profit if the selected location is used
iii.for what output each location is best.
2. A car manufacturer buys front bumpers at Rs.3000. in case if the bumpers are made at his
own unit the fixed costs would be Rs.300000 and variable costs Rs.1800. per bumper. If there
is a demand for 3000 units should the manufacturer make or buy the bumpers.
3. A firm has annual fixed costs of Rs.32 lakhs and variable costs of Rs.350 per unit. It is
considering an additional investment of Rs.8 lakhs which will increase the fixed cost by
Rs.15 lakhs per year and will increase the contribution by Rs.100 per unit. If there is no
change in the selling price of Rs.750 per unit , what is the break even quantity if the new
investment is made?
4. A stockist has to supply 400 units of a product every week to his customers. He gets the
product at Rs 50 per unit from the manufacturer. The cost of ordering and transporting is
Rs.75 per order. The cost of carrying inventory is 7.5% per year of the cost of the product.
i. what is economic order quantity
ii. how long it would take to produce economic lot size.
iii. what is the optimum cost per week.
5. A company uses annually 48000 units of raw material costing Rs.1.25/unit. Ordering costs
Rs.45 per order and carrying costs is 15% of average inventory. Find the economic order
quantity.
Suppose the company follows EOQ policy and it operates for 300 days in a year and the
procurement time is 12 days with a safety stock of 500 units. Find the re-order point, the
maximum. The minimum and the average inventory.
6. Alpha industry estimates that it will sell 12000 units of its product for the forthcoming
year. The ordering cost is Rs.100 per order and the carrying cost is 20% of the purchase price
per unit per year . the purchase price is Rs.50 per unit.
Find i. Economic order quantity, ii. No. of orders per year iii. Time between successive
orders
7. Two managers have resisted the introduction of a computerised exponential smoothing
system, claiming that their judgemental forecasts are much better than any impersonal
computer could do. Their past record of prediction is shown in table below;

Week
A
B

1
4000
4500

2
4200
5000

3
4200
4000

4
3000
3800

5
3800
3600

6
5000
4000

7
5600
5000

8
4400
4800

9
5000
4000

10
4800
5000

1.Compute MAD
ii.compute tracking signal
8. A specific forecasting model is used to forecast demand for a product. The forecasts and
the corresponding demand that subsequently occurred are shown below. Use the MAD and
tracking signal to evaluate the accuracy of the forecasting model.
Month
Actuals in units
Forecast in units

Oct
700
660

Nov
840
840

Dec
750
750

References:
Operations management R.K.HEGDE
Production and Operations Management R.Panneerselvam

Jan
835
835

Feb
910
910

Mar
890
890