1. Ross White's machine shop uses 2,500 brackets during the course of the year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and lead time is 2 days. The holding cost per bracket per year is $1.50 (or 10% of the unit cost) and the ordering cost per year is $18.75. There are 250 working days per year.
a. What is the EOQ?
b. Given the EOQ, what is the average inventory? What is the annual inventory holding cost?
c. In minimizing cost, how many orders would be made each year? What would be the annual ordering cost?
d. Given the EOQ, what is the total annual inventory cost (including purchase cost)
e. What is the time between orders?
f. What is the ROP?
2. Consulting income at Kate Walsh Associates for the period February-July has been as follows:
Use exponential smoothing to forecast August's income. Assume that the initial forecast for February is $65,000. The smoothing constant selected is 0.1. Resolve with a smoothing constant of 0.3. Which smoothing constant provides a better forecast?
3. The unemployment rates in the United States during a 10 year period are given in the following table. Use exponential smoothing to find the best forecast for next year. Use smoothing constant of 0.2, 0.4, 0.6, and 0.8. Which one had the lowest MAD?
