FINAL TERM ASSESSMENT SUMMER 2021

Student’s Name_______Sanjjay Kumar_ Registration Number 1811200______________

Program: BBA Class/Section: A

Course Name: Operation Management Course Code BA 3607

Instructor’s Name: Rashid Qureshi Instructor’s email rashid.qureshi@hyd.szabist.edu.pk

Total Marks: 40 Marks Obtained:

Comment: (This Section is for Faculty Use)

Mention Date & 25 August 2021 Wednesday Mention 25 August 2021

Time of Sharing: 12:00 noon Submission Date: Wednesday

Mention 2.5 HOURS + 30 Minutes

Submission Time: 12:00 Noon to 2:30
30 min extra are for emailing!
File Type Allowed for submission: (MS Word, MS Excel, pdf, Images, Hand written)

IMPORTANT instructions:
 Read all the questions carefully and then solve in this file, if needed.
 Marks of each question are mentioned at the end of each question. Faculty Signature
 Solved Assignment must be emailed to the respective faculty by the due date and time, Late Receiving
will be marked Absent and Zero in Recap Sheet.
 The answer file must be attached in the email.
 Regardless of file type (image or document), email must include attachment for faculty to check.
 Non-submissions of the assignments will be considered as absent for the Final Term and will be marked “0”
on ZABDESK Recap Sheet.
 While checking of the Assignment, SZABIST Plagiarism policy is to be followed.
 Group assignments are not allowed.
_____________________________________________________________________________

Q.1. TK is the purchasing manager for a large company. His fastest moving inventory item has
demand of 5000 units per year. The cost of each unit is 120, and the inventory carrying cost
is Rs10 per unit per year. The average ordering cost is Rs30 per order. It takes about 5 days
for an order to arrive, and the demand for 1 week is 140 units. This company has 250
working days per year?

a. What is the EOQ?

b. What is the average inventory if EOQ is used?

c. What is the annual cost of ordering and holding inventory?
d. What is the total inventory cost , including cost of the 5000 units.
[10 marks]
Q.2. The fixed and variable cost for three potential manufacturing sites of a plastic
chair manufacturer are shown: [10 marks]

Site Fixed Cost per Year Variable cost per unit

A 500 11
B 1000 7
C 1700 4
a. Over what range of production is each location optimal?
b. For a production of 200 units, which site is best?

Q.3. Baker Mfg. Ltd. wishes to compare its inventory turnover to those of industry
leaders, who have turnover of about 15 times per year and 8% of their assets
invested in inventory. [10 marks]

Baker Mfg. Ltd. Rs

Net Revenue 600,000
Cost of Sales 420,000
Inventory 22,500
Total Assets 270,000

a) What is Baker’s inventory turnover?

b) What is Baker’s percent of assets committed to inventory?

c) How does Baker’s performance compare with industry leaders?

Q.4. How does reducing the inventory help gain production efficiency? [10 marks]

Answers on next page

Answer 4
Inventory reduction has a variety of advantages. These are some of them:
1) Cost-cutting
I. There is less money invested in inventories.
II. There is a reduction in the amount of warehouse space required.
III. Insurance prices are lower since the chance of loss is decreased.
IV. There are less losses as a result of rotting or expired or out-of-date items.
2) Reeducation in labor
I. Inventory tracking and verification took less time.
II. Maintenance of the warehouse requires less manpower (s).
III. Warehouses that are smaller are easier to manage.
3) Quality
i) When a product gets improved, it is no longer necessary to sell huge amounts of the previous,
outmoded product.
ii) Large amounts of faulty items do not end up in inventory if there is a flaw or design problem
(because there are no large inventories).