Operations Management

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Question 1 : ASSIGNMENT LP
A transportation company in Mandeville has five delivery vehicles to deliver products along five
delivery routes which have different costs according to the truck used. The estimated costs in United
States Dollars for each truck along each route are provided in the following table:
TRUCK ROUTE
A B C D E
1 1,010 960 600 840 6730
2 800 1,040 940 970 790
3 680 880 830 900 590
4 580 880 860 640 700
5 1,120 770 700 950 1,020
Required:
a) Use the Hungarian assignment method to determine which assembly line should be
assigned to assemble which computer so as to minimize the overall cost
[12 marks ]
b) Formulate the problem as an LP problem to be solved using software such as “excel
solver “
[18 marks ]
Question 2 : Inventory
A gourmet coffee shop in downtown San Fernando is open 200 days a year and sells an average
of 75 pounds of Blue Mountain Peak coffee beans a day. It purchases coffee beans for $15.00 per
a pound. The following information is available about operation of the sale of its coffee:
Order cost = $16 / order
Annual holding cost per unit = 20% of cost per unit
Desired cycle service level = 95%
Lead time = 4 days
Standard deviation of daily demand = 15 pounds per day
Current on-hand inventory is 350 pound, with no open orders or backorders.
a) What is the EOQ? [5 marks]
b) What is the number of order placed per year? [2 marks]
c) What would be the average time between orders? [2 marks]
d) What is the ROP? [3 marks]
e) An inventory withdrawal of 10 bags was just made. - Is it time to reorder?
[3 marks]
f) If the store currently uses a lot size of 500 pounds, determine the annual holding cost and
the annual ordering cost of this policy? [4 marks]
g) What would be the annual cost saved, if any, by shifting from the 500-pounds lot size to the
EOQ? [6 marks]

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