Unit-IV

PART – A
Q. Questions BT
No Level Competence

Define inventory. BTL 1 Remembering

1
2 Classify the Forms of inventory. BTL 2 Understanding

3 Identify the Objectives/significance of inventory model. BTL 3 Applying

4 Highlight the importance of Reorder level. BTL 4 Analyzing

5 Discuss the concept of Lead time. BTL 5 Evaluating

6 Interpret the Types of stock replenishment. BTL 6 Creating

7 List the Basic inventory models. BTL 1 Remembering

8 Compare Ordering Cost and Carrying Cost. BTL 2 Understanding

9 Identify when shortage cost and stock out cost arises? BTL 3 Applying

10 Analyze why safety stock is maintained. BTL 4 Analyzing

11 Discuss the concept of Quantity Discount Model. BTL 5 Evaluating

12 Interpret the meaning of EOQ & EBQ. BTL 6 Creating

13 What are random and pseudo random numbers? BTL 1 Remembering

14 Explain Monte Carlo Method. BTL2 Understanding

15 Summarize the concept of EMV. BTL 3 Applying

16 What inference can you make about holding cost? BTL 4 Analyzing

17 What is Shortage Cost? BTL 1 Remembering

18 Classify types of Inventories. BTL 2 Understanding

19 What is Decision theory? BTL 1 Remembering

20 List the problems that can be solved by Simulation. BTL 1 Remembering

Q. No Questions BT Level Competence

 Alpha industry needs 5400 units per year of a bought out component which will be BTL1 Remembering
used in its main product. The ordering cost is Rs.250 per order and the carrying cost

1 per unit per year is Rs.30.

i) Which is the best order quantity? (8 Marks)
ii) Find the number of order per year and Frequency of orders? (5 Marks)
A stockiest has to supply 12000 units of a product per year to his customer. Demand is BTL2 Understanding
fixed and known. Shortage cost is assumed to be infinite. Inventory holding cost is 20
paise per unit per month. Ordering Cost is Rs. 250 and purchase price is Rs.10 per
2
unit.
i) Estimate the EOQ (8 Marks)
ii) Find the Frequency of orders and total inventory cost. (5 Marks)
ABC manufacturing company purchases 9000 parts of a machine for its annual BTL3 Applying
requirement. Each part costs Rs.20. The ordering cost per order is Rs.15 and the
3 carrying charges are 15% of the average inventory per year. Apply EOQ formulae and
find out the Total Inventory Cost.

Demand for an item in a company is 18,000 units per year. The company can produce BTL4 Analyzing
the items at a rate of 3000 units per month. The Cost of one setup is Rs.500 and the
holding cost of one unit per month is 15 paise. Shortage cost of one unit is Rs.20 per
4
year.
i) Analyze and find the optimum manufacturing quantity (8 Marks)
ii) Find the number of shortages and frequency of Production run. (5 Marks)
i)Formulate the Optimal order quantity for a product for which the price breaks are as BTL5 Evaluating
follows (8 Marks)
ii) Also find the Total cost.(5 Marks)
5
Quantity Unit Cost(Rs.)
O<Q<500 1000
500<=Q<=750 925
750<=Q 875
Find the optimal order quantity for a product when the annual demand for the product BTL6 Creating
is 500 units. The Cost of storage per unit per year is 10% of the unit cost. Ordering
cost per order is Rs. 180. The unit cost are given below:
6 Quantity Unit Cost(Rs.)
O<Q1<500 25
500<=Q2<=1500 24.80
1500<=Q3<3000 24.60
 3000<=Q4 24.40
i) Determine EOQ (8 Marks)
ii) Evaluate the Total Cost (5 Marks)
A company has a demand of 12000 units/year for an item and it can produce 2000 BTL1 Remembering

7 units per month. The cost of one setup is Rs.400 and the holding cost/unit/month is
15 paise. Select the optimum lot size and total cost per year assuming the cost of 1
unit as Rs.4. Find EBQ , the number of set ups & total cost.
A steel manufacturing company is concern with possibility of strike. It will cost an BTL2 Understanding
extra Rs. 20000 to accuse an adequate stock pile. If there is a strike and the company
has not stock pilled, management estimates and additional expenses of Rs. 60,000 on
account of lost sales. Should the company stock pile (or) not if it is to use. .Explain
8 the decision according to :
(i) Minimum Criterion, Pessimistic Criterion and Hurwitz criterion for alpha=0.4 (8
marks)
(ii) Laplace Condition and Minimax regret criteria (5 marks)
A newspaper boy has the following probability of selling a magazine. Cost of a copy is BTL3 Applying
30 paise and sale price is 50 paise. He cannot return unsold copies. How many copies
should he order?
9 No. Of Copies 10 11 12 13 14
Probability 0.10 0.15 0.20 0.25 0.30
i) Illustrate EOL (8 Marks)
ii) Solve EVPI and EPPI. (5 Marks)
A Bakery keeps a stock of particular brand of cake. Daily demand of past experience: BTL4 Analyzing

Daily demand 0 15 25 35 45 50
Probability 0.01 0.15 0.20 0.50 0.12 0.02
Consider the following sequence of random numbers.
10
48 78 9 51 56 77 15 14 68 9

Using this sequence simulate the demand for next 10 days. Find the stock situation if
the owner makes 35 cakes every day. Examine the daily average demand.
Given is the following pay off matrix. BTL1 Remembering

11 Status of Probability Don’t Expand Expand 200 Expand 400

Nature Units Units
High Demand 0.4 2500 3500 5000
 Medium 0.4 2500 3500 2500
Demand
Low demand 0.2 2500 1500 1000
Using EMV criterion . Decide which of the act can be chosen at the best.
Find EVPI & EOL.
BTL2 Understanding

A sample of 100 arrivals of customers at a retail sales depot is according

to the following distribution
Time between Frequency
arrivals (mins)
0.5 2
1.0 6
1.5 10
2.0 25
12 2.5 20
3.0 14
3.5 4
4.0 7
4.5 4
5.0 2

Use random numbers and predict the average time between arrivals.
48 78 9 51 56 77 15 14 68 9

BTL4 Analyzing
A departmental store purchases sprays which can be ordered only in lots of 10. Each
spray cost Rs.75 and sells at Rs.90 each. Used sprays, however have \no salvage value.

Demand 10 20 30 40 50
13 Probability 0.2 0.35 0.25 0.15 0.05
The probability distribution obtained from analysis of past sales data is given below.
i) Analyse the payoff table. (5 Marks)
ii) How much quantity should the departmental store buy to maximize its profit? (8
Marks)

14 A firm owner is seriously considering the drilling of a farm well. In the past only 70% BTL1 Remembering
of the wells have been successful at 200 feet depth. Some people drilled upto 250
 feet,but only 20 % struck water. The prevailing cost is Rs. 50 per foot. He will have to
pay15000in terms of Present value if he has to borrow from the neighbour for the next
10 years. Find which decision is optimal:
i)do not drill well
ii)drill upto 200 feet
iii)Drill upto 250 feet

PART C

Q. No Questions BT Level Competence

A contractor has to supply 10000 bearings per day to an automobile Remembering

manufacturer. He finds that when he starts a production run he can produce
25000 bearings per day. The cost of holding a bearing in stock for one year is 2
1
BTL 1
paise and the set up cost of the production run is Rs.18. How frequently should
production run be made and which is the Best Economic Batch Quantity? How
much would be the No. of Setup and Total Inventory Cost.
A stockist has to supply 400 units of a product every Monday to his customer. Understanding
He gets the product at Rs.50 per unit from the manufacturer. The cost of
ordering and transportation from the manufacturer is Rs.75 per order. The cost of
2 BTL 2
carrying inventory is 7.5% per year of the cost of product. Predict EOQ,
Frequency of orders and Number of Orders, Total Incremental cost and Total
Cost.
Identify the profit under three states of nature & three decision alternative. Applying
State of Nature
Decision Making N1 N2 N3
D1 150 250 300
3 D2 450 250 200 BTL 3
D3 100 180 290
(i) Hurwitz criterion for alpha=0.5(5 marks )
(ii) Laplace Condition(5 marks)
(iii) Mininmax Condition(5 marks)
An automobile production line turns out about 100 cars a day, but deviations Analyzing
occur owing to many causes. The production is more accurately described by
the probability distribution given below;
4 BTL 4
Probability
Production/Day
95 0.03
96 0.05
 97 0.07
98 0.10
99 0.15
100 0.20
101 0.15
102 0.10
103 0.07
104 0.05
105 0.03
Use the random numbers &find the average demand.

48 78 9 51 56 77 15 14 68 9