Homework Answers
Question 1: 101118
Average daily demand (d) = 12000
Std Deviation of Demand (Sd) = 3000
Average lead time (L) = 5 days
Std deviation in lead time (Sl) = 2 days
Z = 1.6448 (95% service level)
Reorder Point = Average demand during lead time + Safety Stock (SS)
Average demand during lead time = d*L = 12000*5 = 60000
SS = Z*SQRT(L*Sd^2 + Sl^2*d^2) = 1.6448*SQRT(5*3000^2 + 2^2*12000^2) = 40988
ROP = 60000 + 40988 = 100988 (Nearest Answer is 101118)
Question 2: Less than 25
Lead time (L) = 2 weeks
Weekly Demand (d) = 87 vials
Std deviation in demand (Sd) = 12 vials
Z = 1.2816 (For 90% Service Level)
Safety Stock = Z*Sd*SQRT(L) = 1.2816*12*SQRT(2) = 21.75 ~ 22 vials
Question 3: 1.451
Dollar Value of Output = Output*Selling Price per unit = 408*125 = $51000
Labor Cost for week 2 = Number of labors * 40* 16 = 6*40*16 = $3840
Overhead Cost = 1500 + 0.5*Labor Cost = 1500 + 0.5*3840 = $3420
Material Cost = 10*Material (ft) = $27900
Total Cost = Labor Cost + Overhead Cost + Material Cost = 3840 + 3420 + 27900 = $35160
Multifactor Productivity = Dollar Value of Output / Total Cost = 51000/35160 = 1.451
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