(B) Calculate the Total Annual Holding Costs for FFF

1. Frederick’s Farm Factory (FFF) currently marintains an average inventory valued at $3,400,000. The company estimates its capital cost at 10 percent, its storage cost at 4.5 percent, and its risk cost at 10 percent.
(a) Calculate the annual holding cost rate for FFF

Annual holding cost rate = % (Round your answer to 1 decimal place.)

(b) Calculate the total annual holding costs for FFF

Total annual holding costs = $.

2. Sam’s Auto Shop services and repairs a particular brand of foreign automobile. Sam uses oil filters throughout the year. The shop operates fifty-two weeks per year and weekly demand is 150 filters. Sam estimates that it costs $20 to place an order and his annual holding cost rate is $3 per oil filter. Currently, Sam orders in quantities of 650 filters. Calculate the total annual costs associated with Sam’s current ordering policy

Total annual costs = $

3. The local Office of Tourism sells souvenir calendars. Sue, the head of the office, needs to order these calendars in advance of the main tourist season. Based on past seasons, Sue has determined the probability of selling different quantities of the calendars for a particular tourist season.

Demand for Calendars / Probability of Demand
75,000 / 0.15
80,000 / 0.25
85,000 / 0.30
90,000 / 0.20
95,000 / 0.10

The Office of Tourism sells the calendars for $12.95 each. The calendars cost Sue $5 each. The salvage value is estimated to be $0.50 per unsold calendar.
Determine how many calendars Sue should order to maximize expected profits?

4. Tax Preparers Inc. works 250 days per year. The company uses adding machine tape at a rate of eight rolls per day. Usage is believed to be normally distributed with a standard deviation of three rolls during lead time. The cost of ordering the tape is $10 and holding costs are $0.30 per roll per year. Lead time is two days.
(a) Calculate the economic order quantity

(Round your answer to 1 decimal place, the tolerance is +/-0.1.)

(b) What reorder point will provide an order cycle service level of 97 percent?

tapes (Round up your answer to the nearest whole number.)

units (Round your answer to 2 decimal places, the tolerance is +/-0.01.)

(d) What reorder point is needed to provide an order-cycle service level of 99 percent?

tapes (Round up your answer to the nearest whole number.)

(e) How much safety stock must the company hold to have a 99 percent order-cycle service level?

units (Round your answer to 2 decimal places, the tolerance is +/-0.01.)

5. The Draper Tax Company provides tax services to local businesses. Draper chooses to meet all demand as it occurs because customers are unwilling to accept back orders. The company has provided the following cost, capacity, and demand information.

Draper Tax Company Problem Data
Cost data
Regular-time labor cost per hour / $25.00
Overtime labor cost per hour / $37.50
Temporary worker cost per hour / $40.00
Hiring cost per permanent worker / $2000.00
Firing cost per permanent worker / $1200.00
Backorder cost / $500.00
Capacity data
Beginning workforce / 12 employees
Labor standard per service / 12 hours
Regular-time hours per period / 40 hours
Overtime hours per period / 8 hours
Demand data
Week 1 / 48 clients / Week 4 / 40 clients
Week 2 / 36 clients / Week 5 / 38 clients
Week 3 / 50 clients / Week 6 / 48 clients

Calculate the size of the workforce needed for the company to meet average weekly demand.
Assume that no overtime is used.

6. The BackPack Company produces a line of backpacks. The manager, Jill Nicholas, has decided that the BackPack Company must have very good customer service.
She has asked you to develop a level aggregate plan using inventories but not back orders. All demand must be met each period. Use the following data to solve the problem:

Problem Data
Cost data
Regular-time labor cost per hour / $10.00
Overtime labor cost per hour / $15.00
Subcontracting cost per unit (labor only) / $84.00
Holding cost per unit per period / $10.00
Back-order cost per unit per period / $20.00
Hiring cost per employee / $600.00
Firing cost per employee / $450.00
Capacity data
Beginning workforce / 210 employees
Beginning inventory / 400 units
Labor standard per unit / 6 hours
Regular time available per period / 160 hours
Overtime available per period / 32 hours
Subcontracting maximum per period / 1000 units
Subcontracting minimum per period / 500 units
Demand data
Period 1 / 6000 units
Period 2 / 4800 units
Period 3 / 7840 units
Period 4 / 5200 units
Period 5 / 6560 units
Period 6 / 3600 units

You must:

A. Calculate the aggregate production rate: units

(Round your answer to 0 decimal places, the tolerance is +/-1.)

B. Calculate the appropriate workforce given the aggregate production rate: employees

D. Calculate the costs of this plan.

Regular-time labor cost / $
Inventory holding cost / $
Back order cost / $
Hiring cost / $
Firing cost / $
Total cost / $

(If the answer is void please enter 0, do not leave any fields blank.)

6. Although the BackPack Company has always used a level aggregate plan, Jill is interested in evaluating chase aggregate plans also. She has calculated how many hires and fires would be necessary to adjust capacity to meet demand exactly each period.

Use the following data to solve the problem.

Now Jill wants to see how the plan would actually work. You need to:

A. Show what would happen if this plan were implemented.

Plan / Period
1 / 2 / 3 / 4 / 5 / 6 / Total
Demand / / 4800 / 7840 / 5200 / 6560 / 3600 /
Employees / / / / / / /
Hires / / /
Fires / / / /

B. Calculate the costs associated with this plan.

Hiring Cost / $
Firing Cost / $
Regular-time labor Cost / $
Total Cost / $
7. Problem Data
Cost data
Regular-time labor cost per hour / $10.00
Overtime labor cost per hour / $15.00
Subcontracting cost per unit (labor only) / $84.00
Holding cost per unit per period / $10.00
Back-order cost per unit per period / $20.00
Hiring cost per employee / $600.00
Firing cost per employee / $450.00
Capacity data
Beginning workforce / 210 employees
Beginning inventory / 400 units
Labor standard per unit / 6 hours
Regular time available per period / 160 hours
Overtime available per period / 32 hours
Subcontracting maximum per period / 1000 units
Subcontracting minimum per period / 500 units
Demand data
Period 1 / 6000 units
Period 2 / 4800 units
Period 3 / 7840 units
Period 4 / 5200 units
Period 5 / 6560 units
Period 6 / 3600 units

Jill Nicholas believes there must be a better aggregate plan. She has suggested a hybrid plan, using a permanent workforce of 195 employees and subcontracting the backorder as needed. Once again, Jill has requested that you provide the following information:

A. Calculate the regular-time production possible each period given a workforce of 195

B. Show what would happen if this plan were implemented.

Plan / Period
1 / 2 / 3 / 4 / 5 / 6 / Total
Demand / / 4800 / 7840 / 5200 / 6560 / 3600 /
Regular-time production units / / / / / / /
Subcontracting / / / / / / /
Ending Inventory / / / / / / /
Backorder Units / / / / / / /

(If the answer is void please enter 0, do not leave any fields blank.)

C. Calculate the costs associated with this plan.

Regular-time production cost / $
Subcontracting cost / $
Ending Inventory Cost / $
Backordering Cost / $
Firing Cost / $
Total Cost / $