MDBM2043/ Operations Management Individual Assignment Answer

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Question 1 

MCM Manufacture is considering three sites, A, B and C at which to locate a factory to build its new-model automobile. The goal is to locate at a minimum-cost site, where cost is measured by the annual fixed plus variable costs of production. The company has gathered the following data:

Site	Annual fixed cost, RM	Variable Cost per auto produced, RM
A	10,000	2,500
B	20,000	2,000
C	25,000	1,000

 

Based on the above information:

1. Construct the total cost curves for all locations (use graph paper to construct the graph).
2. Determine which location to choose for each relevant range of production.

Question 2

Home Deco Enterprise uses special wallpaper which it orders from an outside supplier. The information about the orders is as follows:

Annual demand	3000 rolls
Ordering Cost	RM20 per order
Holding Cost	20% of the item price
Price	RM15 per roll

 

The company is offered the following discounts on the basis price:

For order quantities	200 – 299	Less 20%
	300 – 399	Less 30%
	400 and above	Less 40%

 

Determine the optimal order quantity that will minimize the annual inventory cost.