Course: Operation Management

Course Code: BMGT302

Due Date: April 14, 2022

Assignment - 2

Answer All the Following Questions:

Problem 1:

If the FUS Corporation has the following data about 5 locations:

Location Fixed Cost ($) Variable Cost ($)
A 200,000 10
B 220,000 12
C 150,000 14
D 300,000 6
E 400,000 8

If the firm would like to produce 100,000 units, which location is recommended graphically and
mathematically?

Problem2:

The soft goods department of a large department store sells 175 units per month of a certain large bath
towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated
to be $12.00. The store uses an inventory carrying charge of 27% per year. Determine the optimal
order quantity, order frequency, and the annual cost of inventory management. If, through automation
of the purchasing process, the ordering cost can be cut to $4.00, what will be the new economic order
quantity, order frequency, and annual inventory management cost? Explain these results.

Problem 3:

Louisiana Specialty Foods can produce their famous meat pies at a rate of 1650 cases of 48 pies each
per day. The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per
day. The cost of setup, cleanup, idle time in transition from other products to pies, etc., is $320. Annual
holding costs are $11.50 per case. Assume 250 days per year.
a. Determine the optimum production run.
b. Determine the number of production runs per year.
c. Determine maximum inventory.
d. Determine total inventory-related (setup and carrying) costs per year.

Problem 4:

East Texas Seasonings is preparing to build one processing center to serve its four sources of
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 seasonings. The four source locations are at coordinates shown below. Also, the volume from each
source is provided. What is the center of gravity?

Problem 5:

Using the factor ratings shown below, determine which location alternative should be chosen on the
basis of maximum composite score.

Problem 6:

To be competitive, many fast-food chains began to expand their menus to include a wider range of foods.
Although contributing to competitiveness, this has added to the complexity of operations, including
inventory management. Specifically, in what ways does the expansion of menu offerings create problems
for inventory management?

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