POM

ADDITIONAL PRACTICE PROBLEMS

Problem 1

Peachy Keen, Inc., makes mohair sweaters, blouses with Peter Pan collars, pedal pushers,
poodle skirts, and other popular clothing styles of the 1950s. The average demand for
mohair sweaters is 100 per week. Peachys production facility has the capacity to sew
400 sweaters per week. Setup cost is $351. The value of finished goods inventory is $40
per sweater. The annual per-unit inventory holding cost is 20 percent of the items value.

a. What is the economic production lot size (ELS)?
b. What is the average time between orders (TBO)?
c. What is the total of the annual holding costs and setup costs?


Problem 2
A hospital buys disposable surgical packages from Pfisher, Inc. Pfishers price schedule
is $50.25 per package on orders of 1 to 199 packages, and $49.00 per package on orders
of 200 or more packages. Ordering cost is $64 per order, and annual holding cost is 20
percent of the per-unit purchase price. Annual demand is 490 packages. What is the best
purchase quantity?


Problem 3: Convert the following indented Bill of Materials into a product structure tree.

Part Number Quantity
1100 1
1110 3
1111 1
1112 1
1113 1
1120 1
1124 1
1127 1
1130 2
1131 6
1134 1
1138 2
1139 1


Problem 4

A furniture company has signed a contract to make 500 chairs of H style. The chairs
should be delivered 8 weeks after the date of signing the contract. The product structure
of the chair and the on-hand inventory and lead time (weeks) of each component are
given as below.
POM

Product Structure of H-style chair (quantities of each component for each chair are in
brackets):


On-hand Inventory data and Lead times (weeks)

Item
(component)
On-hand Lead time
(weeks)
H 50 1
G 110 2
F 2 2
A 0 4
C 10 2
B 100 4
D 2 2
E 50 1

Develop a net materials requirements plan for all items.

Problem 5

Redraw the following product structure of Product Alpha with low-level coding and
determine the quantity of each component to produce 100 units of Alpha.





H
(1)

F
(1)
G(1)
D
(1)
B
(1)
A
(1)
C
(1)
E
(1)

E (1) F (1)
Alpha
B (1)
C (1)
D (2) C (2) E (1) F (1)
POM


Problem 6 (P 14.3 in Heizer Render Book)
The demand for subassembly S is 100 units in week 7. Each unit of S requires 1 unit of T
and 2 units of U. Each unit of T requires 1 unit of V, 2 units of W, and 1 unit of X.
Finally, each unit of U requires 2 units of Y and 3 units of Z. One firm manufactures all
items. It takes 2 weeks to make S, 1 week to make T, 2 weeks to make U, 2 weeks to
make V, 3 weeks to make W, 1 week to make X, 2 weeks to make Y, and 1 week to make
Z.
a) Construct a product structure. Identify all levels, parents, and components.
b) Prepare a time-phased product structure.


POM



SOLUTIONS

Problem 1

a. The production lot size that minimizes total costs is

Q* = sweaters 780
) 400 / 100 1 ( 40 * 2 . 0
351 * ) 52 * 100 ( * 2
d/p) - H(1
S * D * 2
=

=


b. The average time between orders (TBO):

Optimal number of orders per year =D/Q* =(52*100)/780 =6.66

TBO =1/6.66 =0.15 year =0.15*52 weeks/year =7.8 weeks


c. The minimum total of ordering and holding costs is

year S
Q
D
H p d
Q
C / 680 , 4 $ ) 351 (
780
5200
) 40 * 02 (
400
100
1
2
780
) ( ) )( / 1 (
2
= +

= + =



Problem 2

Q*
$50.25
= packages 79
5) 0.20($50.2
) 2(490)($64
H
S * D * 2
= =

Total Cost =Order Cost +Holding Cost +Purchase Cost

D P H
Q
S
Q
D
C * ) (
2
) ( + + =
C
79
=(490/79)*64+(79/2)*(0.2*50.25) +50.25*490 =$25,416.44/year



Q*
($49.00)
=
0) 0.20($49.0
) 2(490)($64
H
S * D * 2
= =80 packages

This solution is infeasible because the discount price of $49 per package is only given to
orders of 200 or more. Therefore we must adjust the Q* up to 200 to take advantage of
the discount. We calculate the total cost using the order quantity of 200.
POM

Total Cost =Order Cost +Holding Cost +Purchase Cost

D P H
Q
S
Q
D
C * ) (
2
) ( + + =

C
200
=(490/200)*64+(200/2)*(0.2*49) +49*490
=$980/year +$156.80/year +$24,010/year =$25,146.80/year

Purchasing 200 units per order will save about $270/year, compared to buying 79 units at
a time.



Problem 3:

1100
1110 1120 1130
1124 1127 1111 1112

1113 1131 1134 1138 1139
POM

Problem 4

Period (week)
Lot
size
Lead
time (#
of
periods
)
On
han
d
Safety
Stock
Allo
cate
d
Low-
level
Code
Item
ID

1 2 3 4 5 6 7 8
L4L 1 50 0 H Gross Requirements 500
Scheduled Receipts
Projected On hand 50 50 50 50 50 50 50 50 50
Net Requirements 450
Planned Order Receipts 450
Planned Order Releases 450
L4L 2 2 1 F Gross Requirements 450
Scheduled Receipts
Projected On hand 2 2 2 2 2 2 2 2
Net Requirements 448
Planned Order Receipts 448
Planned Order Releases
44
8
L4L 2 110 1 G Gross Requirements 450
Scheduled Receipts
Projected On hand
11
0
11
0
11
0 110
11
0
11
0
11
0 110
Net Requirements 340
Planned Order Receipts 340
Planned Order Releases
34
0
L4L 4 0 2 A Gross Requirements 44
POM
8
Scheduled Receipts
Projected On hand 0 0 0 0 0 0
Net Requirements
44
8
Planned Order Receipts
44
8
Planned Order Releases
44
8
L4L 2 10 2 C Gross Requirements
44
8
Scheduled Receipts
Projected On hand 10 10 10 10 10 10
Net Requirements
43
8
Planned Order Receipts
43
8
Planned Order Releases 438
L4L 1 50 2 E Gross Requirements
44
8
Scheduled Receipts
Projected On hand 50 50 50 50 50 50
Net Requirements
39
8
Planned Order Receipts
39
8
Planned Order Releases
39
8
L4L 2 2 2 D Gross Requirements
34
0
POM
Scheduled Receipts
Projected On hand 2 2 2 2 2 2
Net Requirements
33
8
Planned Order Receipts
33
8
Planned Order Releases 338
L4L 4 100 2 B Gross Requirements
34
0
Scheduled Receipts
Projected On hand
10
0
10
0
10
0 100
10
0
10
0
Net Requirements
24
0
Planned Order Receipts
24
0
Planned Order Releases
24
0








POM
Solution to Problem 5:

The product structure is redrawn with low-level coding as follows.

Level 0






Level 1



Level 2



Level 3




For 100 units of Alpha:
The number of Bs required is 1*100 =100
The number of Ds required is 2*1*100=200
The number of Cs required is 2*1*100 +1*100 =300
The number of Es required is 1*2*1*100 +1*1*100 =300
The number of Fs required is 1*2*1*100 +1*1*100 =300




Alpha

B (1)

C (1)
D (2)

C (2)

E (1)

F (1)
Alpha

B (1)

D (2)

C (2)

E (1)

F (1)
14.3a
14.3b