Note 1: Show all your work to get credit. Write your solutions clearly and neatly.
Note 2: Cite your sources properly and include them in a references section at the end.
Question 1
Chapter 9: A pharmacist is trying to determine the inventory order and stock levels for a particular drug. The following information is available about the drug.
| Demand | 78 tablets/week |
| Working weeks per year | 52 weeks |
| Purchase price | $20/tablet |
| Annual holding cost per unit | 20% of the unit purchase price |
| Order cost | $48/order |
| Standard deviation of weekly demand | 15 tablets |
| Lead time | 2 weeks |
| Desired cycle service level | 90% |
- What is the economic order quantity (EOQ) for the drug?
- What would be the average time between orders (in weeks) for the EOQ model?
- If the firm decides to use the continuous review system to control the inventory for the drug, what should the reorder point R be?
- If the firm decides to use the periodic review system to control the inventory for the drug, what should be the target inventory level T? Assume that the time between reviews, P, is the average time between orders as calculated in part b.
- For the most recent review, an inventory clerk checked the inventory of the drug and found 255 tablets. There were no open orders or backorders at the time. Determine how many units should the firm order for the periodic review system.
Question 2
Chapter 10: Currently a company that designs Web sites has six customers in its backlog. The time since the order arrived, processing time, and promised due dates are given in the following table.
| Job | Time Since Order Arrived (days ago) | Processing Time (days) | Due Date (days from now) |
| A | 6 | 18 | 48 |
| B | 4 | 22 | 52 |
| C | 1 | 30 | 70 |
| D | 10 | 14 | 28 |
| E | 7 | 12 | 56 |
| F | 5 | 20 | 62 |
- Develop a schedule by using the first-come, first-served (FCFS) rule and calculate the average flow time and average days past due for the schedule.
- Develop a schedule by using the earliest due date (EDD) rule and calculate the average flow time and average days past due for the schedule.
- Comment on the performance of the FCFS and EDD rules relative to average flow time and average days past due.
