(c) A project plan was constructed and the network was designed for designing, writing and installing a bespoke computer database. The critical path and the shortest time to completion is identified as follows:
= Contract negotiation User discussions Review current system Systems analysis (a) Systems analysis (b) Programming Preliminary testing Documentation preparation Implementation Debugging Manual.
(d) This project can be controlled by monitoring and controlling the critical activities and reducing lead time on the other activities which do not contribute towards the critical path. The important activities that need monitoring and control may be the Systems analysis, programming, testing, documentation, implementation and debugging.
(a) The main advantages of holding an inventory are that losses due to unexpected changes in demand and deliveries from suppliers can be avoided and it is a safety net against backorders. The main disadvantages of holding inventory are the increased holding costs incurred due to higher rental value of the space occupied, higher premiums, the danger of the inventory losing its value or becoming obsolete and the loss of money in opportunity costs.
The assumptions made are that the demand rate is known and it is uniform (constant), the ordering cost is constant, quantity discounts do not exist, the production rate is infinite (with no shortages) and the order is received immediately after placing the order. The formula for a simple demand model for the EOQ (Economic Order Quantity) is now given below:
Economic Order Quantity, Q =
Where, C = fixed cost per order (not per unit, in addition to unit cost)
D = annual demand quantity of the product
H = annual holding cost per unit (also known as carrying cost)
(c) Unit cost = 80
Annual holding cost per unit = 20% per year = 0.20 * 80 = 16
Holding cost per unit per month = 1.33
Fixed cost per order = 140
Demand = 700 /month
Therefore, EOQ, Q = 384 units/order
(d) If the supplier offers a 5% discount on the product cost if ordered in lots of 1200 units or more, then the advice to the manager is to place the orders once every four months.
(a) A diagram of a simple and basic EBQ model is shown below (production and consumption model).
The assumption here is that rather than the lot arriving instantaneously, the lot is assumed to arrive continuously at a production rate K. This situation arises when a production process feeds the inventory and the process operates at the rate K greater than the demand rate D. According to this model, the Economic Batch Quantity (EBQ), or the Economic Production Quantity (EPQ) is given by
Where, K = Setup cost
D = Demand rate
F = holding cost
P = production rate
(b) Unit cost of a thermostat = 25
Demand per annum, D = 4000
Production Rate, P = 200 per week = 10400 per annum
Setup costs, K = 240 /setup
Inventory Holding costs, F = 17.5% of