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Unformatted text preview: Total cost = $65,477.94 + $ 82,706.76 = $148,184.7 Queston: David and Beth Sheba run a health food store. Their top selling item is called Heavenly Kelp. The annual demand for this is 810 units, and demand is constant throughout the year. The cost of placing an order is $20, while the holding cost per unit per year is $4. (A) How many orders per year should be placed if they wish to minimize their total cost? (B) What is the minimum possible annual holding and ordering cost? Answer: A) Economic Order Quantity = Sqrt( 2 x A x O / C) Where, A = Annual demand = 810 units O = Ordering cost per order = $20 C = Carrying Cost per unit - $4 So, EOQ = Sqrt( 2 x 810 x $20 / $4) = 90 units. Number of orders to be placed to minimize the total cost = A / EOQ = 810 / 90 = 9 orders. B) Annual holding cost = Average inventory x Holding cost per unit per annum = (EOQ / 2) x $4 = (90 / 2) x $4 = $180 Annual Ordering Cost = Number of orders x Ordering cost per unit per annum = 9 x $20 = $180 So, total minimum possible cost = $180 + $180 = $360...
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- Spring '15
- Management, Economic system, Call-sign allocation plan