Extra_EOQ_lecture%20example2

# Extra_EOQ_lecture%20example2 - 12*50 = 600 1250/2*2.30*20 =...

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311 Operations Management Fall 2007 Name________________________ Section_______________________ Quiz #4 – EOQ a. A specialty coffee house sells Columbian coffee at a fairly steady rate of 1250 pounds monthly (i.e., 15000 pounds per year). The beans are purchased from a local supplier for 2.30 per pound. The coffee house estimates that it costs them \$50 in paper work and labor to place an order for coffee, and the annual holding cost is 20% of the purchase cost. a. What is the total annual cost (excluding purchase cost) if the coffee house order once every month (30 points)?
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Unformatted text preview: 12*50 = 600 1250/2*2.30*20% = 287.5 600 + 287.5 =887.5 b. What is the total annual cost (excluding purchase cost) if the coffee house order once every quarter (30 points)? 4*50 = 200 3*1250/2*2.3*20% = 862.5 200 + 862.5 = 1062.5 c. What is the optimal order quantity (20 points)? Q 2 = 2*15000*50/(2.30*20%) Q = 1805.8 d. How frequently are orders placed under the optimal order quantity (20 points)? We are looking for D/Q or Q/D D/Q = 15000/1805.8 = 8.31 times a year We replenish every 12/8.31 = 1.44 months...
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## This note was uploaded on 06/03/2008 for the course BUAD 311 taught by Professor Vaitsos during the Spring '07 term at USC.

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