Problems Week 4 Betsy Whitfield
ITT Tech Online
MG518 – Operations and Process Management
Professor Eloise Thomas
August 24, 2013

* Chapter 9: Problems 2a, 2b, 5a, and 5b on page 346 * Chapter 10: Problems 2 and 5 on pages 381-382 * Chapter 11: Problems 2 and 3 on pages 407-408 * Chapter 12: Problems 2, 3a, 3b, 10a, 10b, 22a, and 22b on pages 440-443
Chapter 9

Problem 2
Prince Electronics, a manufacturer of consumer electronic goods, has five distribution centers in different regions of the country. For one of its products, a high-speed modem priced at $350 per unit, the average weekly demand at each distribution center is 75 units. Average shipment size to each distribution
Problem 3
Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm’s customers prefer local suppliers. The selling price of the product is $250 per unit in either case. Use the following information to determine which location yields the higher total profit per year:

Location Annual Variable Forecast Demand
Fixed Cost Cost per Unit per Year

Jackson $1,500,000 $50 30,000 units

Dayton $2,800,000 $85 40,000 units

Jackson Location

$250(30,000)-[$1,500,000+($50x30,000)]=$7,500,000-$3,000,000=$4,500,000

Dayton Location

$250(40,000)-[$2,800,000+($85x40,000)]=$10,000,000-$6,200,000=$3,8500,000

Jackson Location has the higher total profit per year.

Chapter 12
Problem 2
Stock-Rite, Inc., is considering the use of ABC analysis to focus on the most critical SKUs in its inventory. For a random sample of eight SKUs, the following table shows the SKU’s unit value and annual demand. Categorize these SKUs as A, B, and C classes.
SKU Code Unit Value Demand (units)
A104 $40.25 80
D205 80.75 120
X104 10.00 150
U404 40.50 150
L205 60.70 50
S104 80.20 20
X205 80.15 20
L104 20.05 100

Problem 3
Yellow Press, Inc., buys paper in 1,500-pound rolls for printing. Annual