Industrial Engineering and Operations Research - ME 332

Homework 4

March 19, 2023

1. Describe the approach of using the Hungarian method to solve the given assignment problem (in the table
below) and minimize the overall cost by assigning jobs to different machines. Provide a step-by-step
explanation of the algorithm and its application in allocating jobs to machines.

Machines
Jobs A B C D E
1 13 8 16 18 19
2 9 15 24 9 12
3 12 9 4 4 4
4 6 12 10 8 13
5 15 17 18 12 20

2. Formula for the Economic Order Quantity, Q*, may be given by,
√︁
𝑄∗ = 2𝐴𝐷/ℎ (1)

where,
D = demand rate (in units per year)
c = unit production cost, not counting setup or inventory costs (in dollars per unit)
A = fixed setup (ordering) cost to produce (purchase) a lot (in dollars)
h = holding cost (in dollars per unit per year); if the holding cost consists entirely of interest on money
tied up in inventory, then
h = ic, where i is the annual interest rate
Q = lot size (in units); this is the decision variable
Assume time and production as continuous (not discrete)

(a) In the derivation of Q*, what makes it certain that this is a minimum?
(b) A gift shop sells Little Lentils cuddly animal dolls stuffed with dried lentils at a very steady pace
of 10 per day, 310 days per year. The wholesale cost of the dolls is $5, and the gift shop uses an
annual interest rate of 20 percent to compute holding costs.
i. If the shop wants to place an average of 20 replenishment orders per year, what order quantity
should it use?
ii. If the shop orders dolls in quantities of 100, what is the implied fixed order cost?
iii. If the shop estimates the cost of placing a purchase order to be $10, what is the optimal order
quantity?
(c) Comment on the re-order quantities between the three parts above.

1
3. Given are the two car companies: Ford and Toyota

(a) A careful study of these two companies shows the benefits of industrial engineering techniques in
a very tangible manner.
i. What would be the one single breakthrough for Ford in the early stages of the company?
ii. What are the fundamental principles that defined the success of Toyota?
(b) More recently, during the Covid years (2020-2022) both companies recovered quite swiftly with
regard to their revenues.
i. What were the commonalities and
ii. What were the differences between the two companies with regard to this recovery?