Winter 2012 - DSC 335 - Problem Set 2

# Winter 2012 - DSC 335 - Problem Set 2 - DSC 335 Operations...

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1 DSC 335 – Operations Management PROBLEM SET #2 – Total: 100 points Due at the beginning of Lecture 20. You must provide detailed calculations and make appropriate explanations to receive full credit. Problem – 1 (25 points) A toy manufacturer uses approximately 2,000 silicon chips monthly. The chips are used at a steady rate during the 240 days a year (equally 20 days a month) that the plant operates. Annual holding cost is \$3.6 per chip, and the fixed ordering cost is \$120. From the time an order is placed, delivery is guaranteed in 10 working days, and the standard deviation of the daily demand is 25 units. (a) Find the continuous review policy with 4% stock‐out probability during the lead time. Clearly state the policy in one sentence. (b) If the ongoing monthly interest rate is 1% (assume no compounding), what is the unit purchasing price of a silicon chip? (c) As an alternative to the unit price you calculated in part (b), if there is an option to procure at \$25/unit when the purchase quantity increases to 1,400 units, what would be the optimal order quantity? (d) Using the optimal order quantity of part (c), how much safety stock would you keep if the stock out costs are \$50/unit.

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## This note was uploaded on 04/04/2012 for the course DSC 335 taught by Professor Tolgaaydinliyim during the Winter '10 term at Oregon.

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Winter 2012 - DSC 335 - Problem Set 2 - DSC 335 Operations...

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