IEOR150F10_SampleMidterm2

# IEOR150F10_SampleMidterm2 - Department of Industrial...

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Department of Industrial Engineering & Operations Research IEOR150 Production System Analysis Sampe Midterm Exam 2 Fall 2010 Name: Grade: 1. A firm imports six items from the Far East. The relevent data for the six items are provided in the following Table. Setup costs for each product amount to \$2,000 per order, and holding costs are based on a 25 percent annual interest rate. Annual Cost Space per unit Item Demand per unit (square feet) DVD player 800 \$200.00 12 32-inch flat screen TV 1,600 \$150.00 18 Blank DVD’s (box of 50) 8,000 \$30.00 3 Blank DVD’s (box of 10) 12,000 \$18.00 2 Compact stereo 400 \$250.00 24 Telephone 1,200 \$12.50 3 (a) Suppose the firm has a sufficiently large warehouse but has only \$200,000 to be invested in these items as holding costs. More precisely, the total purchasing cost of all items stored in the warehouse must be no greater than \$200,000 at any moment. Find the optimal order quantities of the six items respectively to minimize the total annual holding and setup cost. 1

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(b) Now suppose the firm has no budget constraint but has only 20,000 cubic feet of storage space to store these items. Find the optimal order quantities of the six items respectively to minimize the total annual holding and setup cost.
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