A purchasing manager at a local manufacturing company was quoted an estimated time of 47 labor hours to produce a prototype for a new product. The supplier also estimated the learning rate to fall between 82 and 85 percent

1. A store stocks beer mugs and the demand for these beer mugs is 10,200 per year. It costs $120 per
order of the mugs and it costs $1.35 per mug per year to keep the mugs in stock. Once an order is
placed, it takes seven days to receive the order from the distributor. Determine the following:
a. Optimal order size
b. Minimum total annual inventory cost
c. Reorder point

2. The Really Big Weapons Company was asked to bid on the barrel assembly for the 30 mm recoilless
rifle. The company estimates that it will take 10 hours to complete the 25th unit, and based on
historical data for similar barrel assemblies; an 85-percent learning curve is expected.

a. What is the expected average time for the first two units?

b. What is the approximate estimated time for the 100th unit?

3. A purchasing manager at a local manufacturing company was quoted an estimated time of 47 labor
hours to produce a prototype for a new product. The supplier also estimated the learning rate to fall
between 82 and 85 percent.

a. What percentage decrease should the purchasing manager expect in required manufacturing
by the fifth unit?

b. Suppose an expected decrease of approximately 37 percent over the first units was 30
percent. What should the purchasing manager infer about the suppliers efficiency?

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