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# Homework #5 IDS 1601- Operations Management Spring 2012 Due 11:59 pm on Saturday, May 12 Homework 5 has a maximum of 100 points. There are 3...

Homework #5 IDS 1601- Operations Management Spring 2012 Due 11:59 pm on Saturday, May 12 Homework 5 has a maximum of 100 points. There are 3 questions. Students can discuss homework questions with each other or with the instructor, provided that the actual work is done individually . MAKE SURE THAT YOU SHOW YOUR WORK EXPLICITLY. If you are sure your work is complete, upload your file(s) and click on “Submit”. Note: You have not only to “Browse for Local File” and select the file, but also to “Attach File” and Upload the file so that is shows under “Uploaded Files”. The Homework 5 link on Assignments page will disappear at 11:59 pm on Saturday, May 12. Make sure you “Submit” by then. No late homework will be accepted . Homework 5 assignments are accepted only via Angel . I do not accept homework assignments in class. PROBLEMS 1. (10 points for each part) A company provides free tea to their employees by sourcing their tea supplies from Maccabi Tea, a new start-up run by Sy Syms students. Maccabi Tea has promised to supply the company 50 pounds of their specialty loose leaf weekly, for 52 weeks per year. Maccabi Tea, in turn, purchases their tea from a niche Indian supplier for \$10.00 per pound. The shipping cost per order is \$50. Tea storage must be done in a customized, humidity-controlled environment, and storage costs are estimated to be \$2.5 per pound per year. Currently, Maccabi Tea places an order every 4 weeks. a. What is the current annual order cost? b. What is the optimal order quantity for Trojans Tea? c. How many orders are placed per year?
d. Maccabi Tea realizes that holding tea inventory ties up cash and its holding cost of \$2.5 per pound per year does not take into the current financing cost (interest rate) of 10% per year. What is the correct holding cost? What is the optimal order quantity given the correct holding cost? e. Based on the answer to part (e), what is Maccabi Tea’s total annual inventory cost (including all three of holding, ordering and purchasing)? 2. Jean and Jill’s Bakery bake fresh pies every morning. The daily demand for Jean and Jill's apple pies is a random variable with (discrete) distribution, based on past experience, given by: Demand 5 10 15 20 25 30 Probability 10% 20% 25% 25% 15% 5% Each apple pie costs Jean and Jill \$12 to make and is sold for \$20. Unsold apple pies at the end of the day are purchased by a nearby soup kitchen for \$10 each. Assume no goodwill cost. a) (15points) Based on the demand distribution above, how many apple pies should Jean and Jill bake each day to maximize her expected profit? b) (20 points)What is the expected profit if Jean and Jill decides to order the optimal quantity?
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Homework #5
IDS 1601- Operations Management
Spring 2012
Homework 5 has a maximum of 100 points. There are 3 questions. Students can
discuss homework questions with each other or with the...

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