Questions for Review SessionEMBA30_Revised
Problem 6.6 Anu
What is the optimal $ a bank put in its ATM? Given that:
Fixed cost of filling an ATM m/c (S) = $100.
Average withdrawal: $80 and 150 transactions per year
Interest rate 10% pa simple,
(No withdrawal fee)
So unit holding cost, H = $0.10 / year (remember the bank is paying its depositors 10% on the
money that sits in the ATM, cannot lend out that money locked up in the ATM, and does not
charge a withdrawal fee)
So annual demand R (D in our formula)
is estimated to be = 150*80 = 12,000.
Then, the economic quantity of money to place in the ATM machine, everytime the bank
replenishes the ATM,
is given by the EOQ formula:
The number of times the ATM needs to be filled = R/Q = 12000/4898 = 2.45 per year.
Problem 7.3 Anu
7.3
The
Home and Garden (HG)
chain of superstores imports decorative planters from Italy.
Weekly demand for planters averages 1,500 with a standard deviation of 800. Each
planter costs $10. HG incurs a holding cost of 25% per year to carry inventory. HG has
an opportunity to set up a superstore in the Phoenix region. Each order shipped from
Italy incurs a fixed transportation and delivery cost of $10,000. Consider 52 weeks in the
year.
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 Spring '11
 Das
 Management

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