Formulas provided by professor:

EOQ=2DSHEOQ=2DSH

TC=SDQ+HQ2TC=SDQ+HQ2

PurchasingCost=PD

SigmaLTD=SQRT(L)*SigmaR

SigmaLTD=R*SigmaL

SL*=Cu/(Cu+Co)

RT=I

Rp=c/Tp

Cycle Time = CT=1/Rp

Takt Time = TT= 1/R

Cycle Inventory = Q/2

Average Inventory in the Presence of Safety Stock = Cycle Inventory +Isafety

Question:

QUESTION 1:

Auto-Moto receives about 450 loan applications per month (30 working days). All applications go through an Initial Review sub-process, where the applications are then classified as A (looks excellent), B (needs more detailed evaluation), and C (reject summarily). A and B applications would be forwarded to sub-processes A and B, respectively. On average, 10% of all applications go through Sub-process A, 50% go through sub-process B, and the rest are rejected. On average, 50% of applications in sub-process A, and 10% of applications in sub-process B are accepted and the rest are rejected. (Recall that all Cs were rejected.) On average 99 applications are in the Initial Review sub-process, 21 are in sub-process A, and 72 applications are in sub-process B.

1a. How many applications are rejected per month? The potential answers are:

A: 419 applications.

B: 430 applications.

C: 370 applications.

D: 405 applications.

E: 473 applications.

1b. What is the average flow time of an application? The potential answers are:

A: 12.6 days.

B: 12 days.

C: 7.68 days.

D: 12.8 days.

E: 9.15 days.