This preview shows pages 1–3. Sign up to view the full content.
Practice #11
Inventory Management
BUAD311 – Operations Management
Spring 2011
1.
SY Manufacturers (SYM) is producing Tshirts in 3 colors: red, blue and white. The
monthly demand for each color is 3000 units.
Each shirt requires 0.5 pounds of raw cot
ton that is imported from the LuftGeshfetTextile (LGT) Company in Brazil.
The pur
chasing price per pound is $2.5 (paid only when the cotton arrives to the SYM’s facilit
ies) and transportation cost by sea is $0.20 per pound.
The traveling time from LGT’s fa
cility in Brazil to the SYM facility in the USA is 2 weeks.
The cost of placing a cotton
order, by SYM, is $100 and the annual interest rate that SYM is facing is 20%.
a.
What is optimal order quantity of cotton?
b.
How frequent should the company order cotton?
c.
Assuming that the first order is needed in 04/01/2007 when should SYM place the
order?
d.
How many orders will SYM place during the year (04/01/200703/31/2008)
e.
What is the resulting annual holding cost?
.
f.
What is the resulting annual ordering cost?
g.
If the annual interest cost is only 5% how will it affect the annual number of or
ders, the optimal batch size and the average inventory (You are not expected to
provide a numerical answer to this question.
Just describe the direction of the
change, explain your answer)
1
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document2.
Demand for a book at Amazon.com is 250 units per week.
This is the end of the preview. Sign up
to
access the rest of the document.
 Spring '07
 Vaitsos
 Management

Click to edit the document details