Assignment 1 : Practice

Productivity & EOQ Problems

Note: The assignment will include only problems (NO theory – based questions), the
formulas will be given. You do not need to show your steps.
Problem 1:

A company ‘XYZ’’ produces boxes. Current operations allow the company to make 500
boxes per day, in two 8-hour shifts (250 boxes per shift). The company has introduced some
moderate changes in equipment, and conducted appropriate job training, so that production
levels have risen to 300 boxes per shift. Labor costs average $10 per hour for each of the 5
full-time workers on each shift. Capital costs were previously $3,000 per day, and rose to
$3,200 per day with the equipment modifications. Energy costs were unchanged by the
modifications, at $400 per day.

1. What is the daily firm's multifactor productivity before the changes?

MFP( Before Change) = 500 boxes = 500 = 0.119 boxes/$

(8 hrs* 5 workers*10$* 2shifts )+ 3000 + 400 4200

800

2. What is the daily firm's multifactor productivity after the changes? 0.136 boxes/$

Problem 2:

Johns's Ceramics spent $5000 on a new kiln last year, in the belief that it would cut energy usage 25%
over the old kiln. This kiln is an oven that turns "greenware" into finished pottery. John wants to
check the energy savings of the new oven, John has the following data to work with:
Last Year This Year
Production (finished units) 4000 4000
Energy (kWh) 3000 2700

a. Determine the current energy productivity

b. Determine the previous energy productivity change
c. Did the energy modifications generate the expected saving. Justify your answer

4000
a. Energy productivity = = 1.48 unit/kWh
2700

4000
b. Previous Energy productivity = = 1.33 unit/kWh
3000
 1.48−1.33
c. % change = = 11.27% The energy modification did not gain the expected saving
1.33
because 11.25 % < 25%

Problem 3:

A company ‘’ XYZ’’ has an annual demand of 15,000 units. The cost to place and process an
order from the supplier is $75. The cost of each unit is $ 125. The carrying cost is 20% of the
unit cost. The company operates 300 days per year, and the lead time to receive an order
from the supplier is 2 working days.
a. Calculate the total annual carrying cost:

Q/2 * H= 3750$

b. Calculate ROP

ROP= d*LT= 100 unites

Problem 4:

Based on this graph and given that the economic order quantity is equal to 1000 unites, what is the
value of ‘’ c’’ ?

C= 500 unites
Formulas:

ROP = d x L TC = ((D/Q) x S) + ((Q/2) x H)

EOQ=
2DS
H √
N=D/Q

T= Working days per year

Productivity = Output/Input

Productivity Growth = (Current Period Productivity – Previous Period Productivity)/ Previous Period Productivity