Practice Question 1.
Sarah’s Silk Screening
Sarah’s Silk Screening sells souvenir shirts.
Sarah is trying to decide how many to produce for
the upcoming naming of the College of Management.
The University will allow her to sell the
shirts only on one day, the day that the school naming is announced.
Sarah will sell the Tshirts
for $20 each.
When the event day is over, she will be allowed to sell the remaining stock to the
Bookstore for $4 each.
It costs Sarah $8 to make the specialty shirt.
She estimates mean
demand to be 545, with a standard deviation is 115.
How many shirts should she make?
Practice Question 2.
The Great Southern Automotive Co.
The Great Southern Automotive Co. buys steering wheels from a supplier. One particular
steering wheel has a known and constant demand rate of 2,000 units per year. The fixed cost of
ordering is $100 and the inventory holding cost is $2 per unit per year. It takes 2 weeks for an
order to arrive. Compute
a)
The optimal EOQ
b) The reorder point
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 Fall '10
 CHANG
 Management, Sarah, total annual cost, average inventory level

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