SOLUTIONS TO SELECTED PROBLEMS FROM NAHMIAS BOOK

CHAPTER 4
EOQ
4.14

a)

K = 100
I = .25

Hex Nuts
c

For hex nuts:

Molly Screws

= .15
= 20,000

Q*1 =

(2)(100)(20,000)
(.25)(.15)

T1 = . Q*1 / =
For molly screws:

Q *2 =
T2

b) 1.

= .38
= 14,000
= 10,328

5164 years

(2)(100)(14, 000)
(.25)(.38)

Q*2/

5,4229

.3879 years

Average annual cost when ordered separately:

(2)(100)20,000)(.25)(.15) +

(2)(100)(14,000)(.25).38)

= 387.30 + $515.75 = $903.05

2

If both products are ordered when the hex nuts are ordered (every .5164
yrs.), then hex nut cost is the same. Molly screw cost is only the holding
cost.
Qmolly = () (1) = (14,000)(.5164) = 7230.
Holding cost = (7230/2)(.25)(.38) = $343.43
Total cost of this policy = $387.30 + 343.41 = $730.73
(a savings of $172.34 annually from ordering separately).

3. If both products are ordered when the molly screws are normally ordered
(every .3878 yrs.), then the lot size for the hex nuts is:
Qhexnuts = T2 = (20,000)(.3878) = 7756
Holding cost = (7756/2)(.25)(.15) = $145.43
The total cost of this policy is $515.75 + $145.43 = $661.18 which
represents a savings of $241.87 over ordering separately.

4.19

K
c
I
h

=
=
=
=
=
=

150/month = 1800/year
720/year
700
85.00
.28
Ic(1 - /P) = (.28)(85)(1-720/1800)

= 14.28

a)

Q* =

2K

(2)(700
)(720)
=
= 266
h
'
14.28

b)

T1

Q*/P = 266/1800 = .1478 years (up time)

=
=

T2 =

Q*/ = 266/720 = .3694 years (cycle time)

T - T1 = .3694 - .1478 = .2216 years (down time)

Maximum inventory level = H = Q*[1 - /P]

= 266[1-720/1800] = 159.60

c)

Maximum dollar investment = (159.60)(85.00) = $13,566.00.

4.21

a)

Optimal number of single rolls to purchase

Q(0) =

( 2)(1)(4)
=8
(.25)(.45)

where = 4
I = .25
K = 1
c0 = .45
b)

If you buy in single packs, the average annual cost is

c0 +

2KIc0

= (4)(.45) +
= $2.75 yearly

(2)(1)(4)(.25)(.45)

If you buy in 12 packs, the average annual cost is

c

Ic1Q K
+
= ( 4)(.42)
2
Q

(.25)(.42 )(12)
2

(1)(4)
= $2.64
12

which is slightly less expensive.

c) It may be inconvenient to carry and store the tissue. A 12 pack requires three
years before it is completely consumed. The tissue may become brittle during that
time.

4.23

Incremental schedule for source B.

C(Q)

2.55Q for Q 3,000

C(Q)

=
=

(2.55)(3,000) + 2.25(Q - 3,000) for Q 3,000

7650 + 2.25Q - 6750 = 900 + 2.25Q for Q 3,000

C(Q)/Q

2.55 for Q 3,000

900/Q + 2.25 for Q 3,000

=
=

G(Q) = [20,000]

900
(100 )( 20, 000 )
900
Q
+ 2.25 +
+ (.20)
+ (2.25)
Q
Q
Q
2

18,000,000 2,000,000 (.20)(2.25)Q

+
+
+ $45,090
Q
Q
2

20,000,000
+ 0.225Q+ $45,090
Q

The minimizing Q occurs where Q =

cost =

2 0,0 0 0,0 0 0
9428

20,000,000
= 9428
.225

+ (.225)(9428) + $45,090 =

$49,332.64
Since the annual cost for source A exceeds $50,000, now source B should be used.

4.26 First we find the space consumed by lettuce and zucchini.

.45/.29 = 1.55 lettuce consumes (.5)(1.55) = .775
.25/.29 = .862 zucchini consumes (.5)(.862) = .431
Computing the respective EOQs, we have

EOQtom

(2)(100)(850)
= 1531
(,.25)(.29)

EOQlettuce

(2)(100)(1280)
= 1509
(.25)(.45)

EOQzucchini =

(2)(100)(630
= 1420
(.25)(.25)

Next we find the value of the multiplier m.

m =

W
1000
1000
=
=
= .3926
wi EOQi (.5)(1531) + (.775)(1509) + (.431)(1420) 2547

Hence, the optimal order quantities are:

Qtomatoes

= (1531)(.3926) = 601

Qlettuce

= (1509)(.3926) = 592

Qzucchini

= (1420)(.3926) = 558

Checking that the constraint is satisfied:

(.5)(601) + (.775)(592) + (.431)(558) = 999.8.

4.27

If the vegetables are purchased at different times, then larger lot sizes could be used
without violating the space constraint, since the maximum inventory levels of Q1
would not be reached simultaneously.

4.29

The input data for this problem are:

2500
5500
1450

P
45000
40000
26000

h
2.88
3.24
3.96

h
2.7200
2.7945
3.7392

K
80
120
60

a) First we compute T*.

T* =
years
b) and c)

(2)(80 + 120 + 60)

(2.72)(2500) + (2.7945)(5500) + (3.7392)(1450)

= .1373

The order quantities for each item are given by the formula
Qj

= Tj.

Q1
Q2
Q3

= 343.21
= 755.05
= 199.06

Obtain:

The respective production times are given by Tj = Qj/Pj.

Substituting, one obtains:
T1
T2
T3

= .007626
= .018876
= .007656

It follows that the total up time each cycle is the sum of these three quantities
which gives: total up time = .03416. The total idle time each cycle is .1373 .0342 = .1031. The percentage of each cycle which is idle time is thus
.1031/.1373 = 75%.
d) Using the formula
n

G(T) =

(K
j =1

/ T + hj ' j T / 2)

one obtains, G(T) = $3787.82 annually.

4.31

Given information:
K
c
I

a)

EOQ =

= 60 per month = 720 per year

= $20.
= $2.80
= .22 (giving h = (.22)(2.8) = .616.

2K
=
h

(2)(20)(720)
= 216
.616

T = Q/ = 216/720 = 0.3 years (3.6 months).

b)

R =

c)

G(Q*) =

= (60 per month)(3/4 months) = 45.

2Kh =

(2)(20)(720)(.616) =

$133.19 annually.

d) It is possible that the store does not have enough room to store 216 boxes of the
filters, thus requiring a smaller standing order.

4.34

a)

=
=
=
=

200 (both cases)

(200)(52) = 10,400
75 locally
65 overseas

Average annual cost at the optimal solution is G(Q) = c +

2KIc in both cases. Substituting the appropriate costs we obtain:

locally
G(Q) = (10,400)(75) +
= $787,899.37

(2)(200)(10,400)(.2)(75)

overseas
G(Q) = (10,400)(65) +
$683,353.91

(2)(200)(10,400)(.2)(65) =

Difference = $104,545 annually.

b)

The average pipeline inventory is . Hence:

locally:

(200)(52)(1/12)

866.67 units

overseas: (200)(52)(6/12)

5,200 units

The value of the local inventory is (866.67)(75) = $65,000

Value of overseas is (5,200)(65) = $338,000
Difference = $273,000
Assuming 20% rate of interest, this difference would cost the firm (273,000)
(.2) = $54,600 annually, which is less than the savings realized in holding and
set-up cost realized by producing overseas. Hence on the basis of cost alone,
overseas production is still preferred.
c)

The differences in cost of $50,000 yearly could easily be outweighed by the

firm's competitive advantage at being able to be more responsive to market
demands due to the shortened production lead time locally.