# 2024 – Fun n Games is a large discount toy store in Fashion City Mall The store typically

Operations Management Question – 2024

2024 – Fun n Games is a large discount toy store in Fashion City Mall The store typically.

Fun ’n Games is a large discount toy store in Fashion City

Mall. The store typically has slow sales in the summer

## Increase dramatically

months that increase dramatically and rise to a peak at Christmas.

However, during the summer and fall, the store must

## >build

build up its inventory to have enough stock for the Christmas

season. In order to purchase and build up its stock during the

months when its revenues are low, the store borrows money.

Following is the store’s projected revenue and liabilities

schedule for July through December (where revenues

are received and bills are paid at the first of each month).

Revenues

Liabilities

July

\$20,000

\$60,000

August

30,000

60,000

September

40,000

80,000

50,000

30,000

November

80,000

30,000

December

100,000

20,000

## >&nbsp

At the beginning of July the store can take out a sixmonth

loan that carries an 11% interest rate and must be

paid back at the end of December. (The store cannot reduce

its interest payment by paying back the loan early.)

The store can also borrow money monthly at a rate of 5%

interest per month. Money borrowed on a monthly basis

must be paid back at the beginning of the next month.

The store wants to borrow enough money to meet its cash

flow needs while minimizing its cost of borrowing.

## >&nbsp

a. Formulate and solve a linear programming model for

this problem.

## >&nbsp

b. What would be the effect on the optimal solution if

the store could secure a 9% interest rate for a 6-month

loan from another bank?

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