Question

Allegheny Bank has a branch at the local community college. The branch is the busiest at the beginning of the college year when freshman open accounts. This year, freshman arrived at the office at a rate of 3 every twelve minutes. On average, it takes the Allegheny Bank staff person about 2.5 minutes to process each account application. The bank is considering having one or two tellers. Each teller is paid $15 per hour and the cost of waiting in line is assumed to be $19 per hour.

Based on a single server answer the following:

d. If 2 tellers are now employed, what is the time in the system?                            [ Select ]                       ["2.95 minutes", "2.77 minutes", ".27 minutes", "6.77 minutes"]         minutes

e. What is the cost of the system based on 2 tellers?                            [ Select ]                       ["$61.56", "$43.16", "$31.29", "$45.17"]      

f. What is the cost savings or increase by adding a second teller?                            [ Select ]                       ["$3.51", "$-11.88", "$2.67", "$-1.95"]      

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The soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00. The store uses an inventory carrying charge of I = 27% per year.

Determine the following:

a. What is the optimal order quantity?                            [ Select ]                       ["195.67", "56.78", "273.25", "211.78"]      

b. What are the number of orders?                            [ Select ]                       ["7.25", "8.67", "7.69", "5.67"]      

c. What is the cost of managing the inventory                            [ Select ]                       ["184.44", "100.75", "92.22", "75.78"]      

d. If the department store is open 350 days per year, how many days are between orders?                            [ Select ]                       ["55.2", "45.5", "75.0", "40.5"]      

e. If the lead time from the supplier takes 10 days, what is the re-order point?                            [ Select ]                       ["55", "30", "65", "60"]      

Answer 1

Bath Towels:

a. Optimal Order Quantity: [(2*D*S)/H]^1/2

where D is annual demand = monthly demand * 12--> 175*12 = 2100

S is the Cost of Order Placement, $ 12 per order

H is the Holding cost, 27% of the cost of the towel. .27*2.5 = $ 0.675 per unit per year

Thus Optimal Order Quantity: [(2*2100*12)/0.675]^1/2 = 237.25 units

b. Number of orders = Total Annual Demand/OOQ --> 2100/237.25 = 8.67 orders