exam 2 sheet

# exam 2 sheet - h = holding cost per item c = variable cost...

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Ch. 4 Average Annual Cost of holding and setup =G(Q) = K*lambda / Q + lambda*c + h*Q / 2 Optimal Order Quantity = EOC = Q* = Sqrt( 2*K*Lambda / h) Sensitivity = G* = Sqrt( 2*K*Lambda*h) Time Between Orders = (Q*) / Lambda Reorder Level = Lambda*T Lead Times Exceeding One Cycle: Pg. 198, bottom left, Pg 199, top right Ex: Demand is 500 per year, lead time is 6 weeks, cycle is 2.6 weeks. 6 / 2.6 = 2.31 weeks, which is how far in advance an order should be placed. This means and order must be placed .31 cycle in advance of every cycle. (Pg. 198, 199) Ch. 5 Critical Ratio = F D (Q*) = c(u) / (c(o)+c(u)) = Probability that all demand is satisfied during the period Underage Cost = c(u) = Sale Value – Cost to Purchase = p + S – c S = Selling Price per item p = loss of goodwill cost plus bookkeeping expenses c = variable cost per item Overage Cost = c(o) = Cost to Purchase – Salvage Value = h + c

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Unformatted text preview: h = holding cost per item c = variable cost per item When unknown demand is assumed normal with no underage or overage costs given, use: Step 1: Q(o) = Sqrt( 2*Lambda*K / h) F(D)(Ro) = 1 – Q(o)*h / (Price of shortage per unit*Lambda) Step 2: Q(i) = Sqrt( 2*Lambda*[K+p*n(R(i-1))] / h) F(D)(Ri) = 1 – Q(i)*h / (Price of shortage per unit*Lambda) If Qi approximately equals Q(i-1) or Ri approx. equals R(i-1), then stop and use those quantities for Q and R, otherwise, continue step 2 until this occurs. n(R) = expected # of shortages = σ*L(z) = σ*L((R-μ)/σ) L(z) can be looked up in Table A-4 R = μ + Φ(1 – Q*h/(p*lambda))*σ Safety Stock = s = Reordering Point – Lambda * Lead Time Holding Cost Over Avg. Cycle = (Reordering Point – Lambda * Lead Time + Q* / 2)*h*Q / Lambda p = penalty cost Shortage Cost Per Cycle = p*n(R)...
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exam 2 sheet - h = holding cost per item c = variable cost...

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