University of WindsorOdette School of Business

Operations Management I 73-331-01 Fall 2007 Assignment 2

Due Date: Monday, November 12, 2007 (1:00pm in class)

Assignments are to be collected during the first 10 minutes of the class on November 12, 2007. Late assignments up to 2:20pm on November 12 will be accepted but a 30% penalty applies. No assignment will be accepted after 2:20pm November 12, 2007.

Attach a cover page with your assignment showing Course number, student name, and student ID.

1. Harold Gray owns a small farm in the Salinas Valley that grows apricots. The apricots are dried on the premises and sold to a number of large supermarket chains. Based on past experience and committed contracts, he estimates that sales over the first six months of year 2008 will be as follows:

Month Forecasted Demand

(packages)January 550February 300March 650April 250May 800June 500

There are currently three workers on the payroll. Grey estimates that he will have 100 packages on hand at the end of December 2007. Each worker is paid $1250 per month. Inventory costs have been estimated to be 25 cents per package per month, and shortages are not allowed. Grey estimates that it costs $600 for each worker hired and $1100 for each work fired.

a. Assuming that shortages are not allowed, determine the minimum constant workforce that Grey will need over the first six months of 2008

b. Develop a production plan if no shortage and no ending inventory is allowed.c. Evaluate the cost of your plans found in parts (a) and (b).

2. A company has the option of purchasing Product X from an outside supplier or manufacturing internally. If Product X is purchased, the company will be charged $32 per unit plus a cost of $7 per order. If the company manufactures Product X internally, it has the production capacity of 8000 units per year. It costs $65 to set up a production run, and annual demand is 4500 units per year. If the annual holding cost is 15% and the cost of manufacturing one unit is $25, determine whether the company should purchase or manufacture the item.

3. To produce a tape recorder doll the Educational Toy Company purchases all the doll material from the same vendor. The annual demand is 9,000 units, ordering cost is $11 and holding a dollar value in inventory for one year costs $0.22.

The vendor offers the following discount prices: Order < 500 units: $2 per unit 500 <= Order < 1000 units: $1.75 per unit Order >= 1000 units: $1.5 per unit

Find the optimal order quantity for Educational Toy Company for doll material.

4. Rapid Gear has a single CNC machine for producing four types of gears. One lot of each type will be produced in a cycle, which may include idle time. The relevant information concerning the products is given in the table below:

Product

Monthly requirement

s

Setup Time (hours)

Unit Cost Production Rate

(units/day)A 550 7 250 250B 600 6 350 350C 450 5 400 200D 750 3 450 350

Worker time for setups is valued at $75 per hour, and holding costs are based on a 22 percent annual interest charge. Assume 8 hours per day, 20 working days per month and 12 months per year for your calculations.a. Determine the optimal length of the rotation cycle.b. What are the optimal lot sizes for each product?c. What is the percentage of uptime (in each cycle) for the CNC machine assuming

that it is not used for any other purpose? Note: The uptime for the CNC machine is the total time required to produce items A, B, C and D.

d. What is the percentage of idle time (in each cycle)?