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IEOR150 Production System Analysis
Midterm Exam 2
Fall 2010
Name:
Grade:
1. (15 points; 3 points each) Determine whether the following statements are true or false.
CIRCLE or BOX “T” if the statement is true or “F” if it is false. You DO NOT need to
provide any explanation.
(a)
T
F
When using the (
Q,R
) model to solve inventory problems with stochastic
demands, any problem with a positive lead time has an equivalent problem with zero
lead time.
(b)
T
F
If a (
Q,R
) policy is applied to a periodic review inventory system, there is
an equivalent (
s,S
) policy.
(c)
T
F
If an (
s,S
) policy is applied to a continuous review inventory system, there
is an equivalent (
Q,R
) policy.
(d)
T
F
Consider a (
Q,R
) problem of achieving a type 2 service objective
β
, where
β
is the ﬁll rate. The minimized total holing and setup cost under the optimal (
Q,R
)
policy must be higher if
β
increases.
(e)
T
F
Let
G
*
be the minimized total annual holding and setup cost and
e
G
*
be the
minimized total annual cost (i.e. including the purchasing cost) under the optimal order
cycle time for a given EOQ problem. Suppose we impose the power-of-two constraint
and ﬁnd the corresponding minimized total annual holding and setup cost
G
0
and the
minimized total annual cost
e
G
0
. For BOTH pairs of costs, we always have
G
0
G
*
≤
1
.
0608 and
e
G
0
e
G
*
≤
1
.
0608
.
1

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*Sign up* 2. (20 points) You have been asked to ﬁnd a (
Q,R
) inventory policy to control the stock level
of a popular product in your company. The marketing department estimated that the weekly
demand follows a normal distribution with mean ¯
μ
and standard deviation ¯
σ
. It takes
τ
weeks to receive this product after an order is placed. Assume
τ
is a positive integer. The
the unit purchasing cost is
c
, the setup cost is
K
per order, and the annual interest rate used

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