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Fall 2024 MTH601 Sol 01

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47 views3 pages

Fall 2024 MTH601 Sol 01

Uploaded by

ridaamir474
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Fall 2024 MTH601: Operation Research

Assignment No. 1
Student id: bc190200993
Question no:01
A warehouse has a limited storage capacity of 7,00 units. The annual demand for a product is 55,000
units. The ordering cost per order is Rs. 215, and the holding cost per unit per year is Rs. 25. Calculate
the total annual inventory cost if the item cost Rs. 2.5

Answer:
- Storage capacity (Q max) = 7,000 units

- Annual demand (D) = 55,000 units

- Ordering cost (Co) = Rs. 215 per order

- Holding cost (Ch) = Rs. 25 per unit per year

- Item cost (C) = Rs. 2.5 per unit

Step 1: Calculate Economic Order Quantity (EOQ)

EOQ = √((2 × D × Co) / Ch)

EOQ = √((2 × 55,000 × 215) / 25)

EOQ = √(473,000)

EOQ = 687.75 units

Step 2: Since EOQ (687.75) is less than storage capacity (7,000), we can use EOQ for our calculations.

Step 3: Calculate number of orders per year (N)

N = D / EOQ

N = 55,000 / 687.75

N = 80 orders per year

Step 4: Calculate total annual costs:

a) Annual ordering cost = N × Co

= 80 × 215

= Rs. 17,200

b) Average inventory = EOQ/2

= 687.75/2
= 343.875 units

c) Annual holding cost = Average inventory × Ch

= 343.875 × 25

= Rs. 8,596.88

d) Annual item cost = Annual demand × Item cost

= 55,000 × 2.5

= Rs. 137,500

Step 5: Total annual inventory cost = Annual ordering cost + Annual holding cost + Annual item cost

= 17,200 + 8,596.88 + 137,500

= Rs. 163,296.88

Therefore, the total annual inventory cost is Rs. 163,296.88

Question no: 02

The demand for a product in a factory is 27,800 units per year, and the factory can produce at a rate of
4,000 units per month. The setup cost per production run is Rs. 657, and the holding cost is 52 paisa per
unit per month. If the item cost is Rs. 5 per unit, and no shortages are allowed, the determine the
following

1. The optimum manufacturing quantity.

2. The maximum inventory level.

Answer:

Annual demand (D) = 27,800 units/year

Production rate (P) = 4,000 units/month = 48,000 units/year (4,000 × 12)

Setup cost (Co) = Rs. 657

Holding cost (Ch) = 0.52 Rs/unit/month = Rs. 6.24/unit/year (0.52 × 12)

Item cost = Rs. 5/unit

No shortages allowed

1. First, let's calculate the optimum manufacturing quantity (EMQ):

The formula for EMQ in a production environment is:

EMQ = √((2 × D × Co)/(Ch × (1 - D/P)))


Step 1: Calculate (1 - D/P)

1 - D/P = 1 - (27,800/48,000)

= 1 - 0.579

= 0.421

Step 2: Put values in EMQ formula

EMQ = √((2 × 27,800 × 657)/(6.24 × 0.421))

= √(36,505,200/2.627)

= √13,896,155.31

= 3,728.56 units

Therefore, the optimum manufacturing quantity is 3,729 units (rounded to nearest whole number)

2. Now, let's calculate the maximum inventory level:

The formula for maximum inventory is:

Imax = Q(1 - D/P)

where Q is the EMQ we calculated

Step 1: Use EMQ and (1 - D/P) calculated earlier

Imax = 3,729 × 0.421

= 1,569.91 units

Therefore, the maximum inventory level is 1,570 units (rounded to nearest whole number)

To summarize:

1. Optimum manufacturing quantity (EMQ) = 3,729 units

2. Maximum inventory level = 1,570 units

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