1. There are three equally likely states of nature (High, Medium, and Low demand). If the Build a large factory option will post profits of $90,000, $30,000, and - $30,000, respectively, in the three states of nature, what is the EMV of the option? Find the closest value.
$50,000
$30,000
$20,000
$28,666
2. Demand for dishwasher water pumps is 10 per day. The standard deviation of demand is 2 per day, and the order lead time is 4 days. The service level is 97%. What is the reorder point? Find the closest value.
8
32
40
48
3. Barbara Flynn is in charge of maintaining hospital supplies at General Hospital. During the past year, the mean daily demand for bandage BX-5 was 100 and was normally distributed. The standard deviation of the daily demand was 8. Ms. Flynn reviews the inventory levels once every 2 days. It takes another 2 days to receive the deliveries of the bandage after an order is placed. Suppose the required z value is 1.65 to ensure a satisfactory service level. Then how many bandages should Ms. Flynn order each time? Find the closest value.
400
263.1
426.4
456.4
4. Which of the following statements is INCORRECT about the EOQ model?
EOQ increases as setup cost per order increases
EOQ increases as annual demand increases
EOQ increases as inventory holding cost per unit per year increases.
When setup cost per order increases, the number of orders to be placed in a year decreases.
5. What combination of a and b values will yield the optimum for the following problem?
Maximize $6a + $10b, subject to (1) 2a + b <= 6; (2) 3a + 2b <= 24 and (3) a, b >= 0.
a = 0, b = 0
a = 3, b = 3
a = 0, b = 6
a = 6, b = 0