BUSN 401: QUANTITATIVE METHODS FOR BUSINESS MANAGEMENT

Summer 1 2017 – 2018

Project

Project

1. A company makes bicycles. It produces 600 bicycles a month. It buys the tires for bicycles from a
supplier at a cost of $25 per tire. The company’s inventory carrying cost is estimated to be 20% of
cost and the ordering is $50 per order. Calculate the EOQ.
(CLO K1 – 10 Marks)

2. A chemical company makes two types of chemicals, one type of standard quality (s) and the other
of top quality (t). To make these chemicals, he needs two ingredients, the pigment and the resin.
Standard quality chemical requires 2 units of pigment and 3 units of resin for each unit made, and
is sold at a profit of $2 per unit. Top quality chemical requires 4 units of pigment and 2 units of
resin for each unit made, and is sold at a profit of $1.50 per unit. He has stocks of 12 units of
pigment, and 10 units of resin. Formulate the above problem as a linear programming problem to
maximize his profit?
(CLO K1; S1 – 10 Marks)

3. The annual demand for an item is 2300 units. The unit cost is $8.0 and inventory carrying charges
25% per annum. If the cost at one procurement is $150.0 determine:

i) Economic Order Quantity.

ii) Number of orders per year.
iii) Time between two consecutive orders.

(CLO K1 – 4 Marks + 3 Marks + 3 Marks)