operation management

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OM 305

Dr. Robert Aboolian

Assignment # 5

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Problem 1: (5 points) Tina Melkonian’s bakery prepares all its cakes

between 4 a. m. and 6 a. m. so they will be fresh when customers arrive.

Day- old cakes are virtually always sold, but at a 77% discount off the

regular $ 10 price. The cost of baking a cake is $ 4, and demand is estimated

to be normally distributed, with a mean of 25 and a standard deviation of 4.

What is the optimal stocking level?

Problem 2: (30 points) Assume that you are the manager of Assembly, Inc.

You have just received an order for 40 units of an industrial robot, which is

to be delivered at the start of week 7 of your schedule. Using the following

information, determine how many units of subassembly G to order and the

timing of those orders (using MRP method). Assume that subassembly G

must be ordered in multiples of 40 units. Also assume that an extra 20

percent scrap for Robot assembly must be included.

Item Lead Time (weeks) On Hand Components

Robot 2 20 B, G, C(3)

B 1 5 E, F

C 1 10 G(2), H

E 2 4 -

F 1 8 -

G 2 16 -

H 2 10 -

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Problem 3: (15 points) Sally’s Silk Screening produces specialty T-Shirts

that are primarily sold at special events. She is trying to decide how many

to produce for an upcoming event. During the event itself, which lasts one

day, Sally can sell T-shirts for $20 apiece. However, when the event ends,

half of the unsold T-shirts are sold $4 apiece. It costs Sally $8 to make a

specialty T-shirt.

a) Using Sally’s estimated demand that follows, how many T-shirts should

she produce for the upcoming event?

b) What is the service level when optimal decision has been made?

Demand Probability 300 0.05 400 0.1 500 0.3 600 0.15 700 0.2 800 0.2