Problem 1 Jerry is production manager for the Proto Plastics Company.

They make two major items -

widgets and gizmos. Demand history, by month, for the last two years is given. You have recently been hired at Proto, and Jerry has asked you to plan production for the next two years. It takes a worker two days to make a widget and three days to make a gizmo. Currently, there are 32 workers at the plant. To hire a new worker costs $700, and to lay off an existing worker costs $1000. Workers are paid $2000 per month. A widget costs $250 to make, and a gizmo costs $380. The inventory -cost carrying rate for Proto is 36 percent per year. Backorders are not allowed. Develop a monthly aggregate production plan and work-force levels for months 25 through 30.

Year 1 Month 1 2 3 4 5 6 7 8 9 10 11 12 Widgets 101 97 94 102 101 92 97 91 103 92 97 91 Gizmos 200 197 196 200 202 209 207 216 212 220 216 218 Month 13 14 15 16 17 18 19 20 21 22 23 24

Year 2 Widgets 102 102 97 110 92 102 110 92 102 107 103 91 Gizmos 222 220 225 222 227 228 232 234 242 236 241 239

Problem 2 The Bike Company has a special line of mountain bikes, for which 5000 handlebars are required annually. They can be purchased for $30 per unit or produced internally. The production cost is $20 per unit, and the production rate is 20,000 units per year. Set -up cost is $110, whereas issuing a purchase order costs $25. Inventory holding cost is 25% per year. Should the Bike Company make or buy the item, assuming no shortages are allowed?

Problem 3 A company produces two items, A and B, that are perishable and deteriorate in inventory. The pertinent data are:

A Demand per year Item cost Annual carrying cost rate Set-up cost Shortage costs/unit/year 2000 50 0.20 100

B 250 60 0.10 480 2

Management has established the policy that the total inventory turnover must be greater than or equal to 19 (recall that the inventory turnover is defined as the annual demand of all items expressed in dollars divided b y the average total investment in inventory). Determine the optimal inventory policy and the cost to management of the inventory turnover policy. Problem 4 The Bench Company is a small manufacturer of wooden benches. Their line includes four types of benches that differ in size, material, finish, and color. follows: Pertinent production data are as

Bench Type 1 Annual demand (units) Set-up cost ($) Unit cost ($) Space per unit (ft 2 ) 1000 6 10 5 2 5000 10 3 1 3 10,000 10 5 1 4 8000 8 2 1.5

Bench has a small warehouse for finished benches, which has an area of 1500 ft 2 . Each bench has a fixed location. Assuming i = 20 % annually, calculate the optimal quantities to be stored. Bench has an offer to double the storage space, which will result in an increase of $200 in annual expenses. Should Bench do it?

Problem 5 Poseidon Meter, Inc., makes a variety of water meters. Data for the past year indicate a worker can make, on average, 100 meters per four-week period. The inventory holding cost is computed to be $1 per meter per period. Backorders, if allowed, cost about $2 per meter per period. New workers can be hired, at a cost of $1000 per worker and existing workers can be laid off at a cost of $2000 per worker. Workers are paid $1500 per period. There are currently 10 workers at Poseidon. The forecast for the next four periods is 1200, 1200, 1000 and 1000. Develop a zero inventory plan for the next four periods. Develop a constant work force plan (no backorders) for the next four periods