Solutions to Inventory Management Practice Problem .ppt - Solution to the Inventory Management Practice Problems EOQ and Quantity Discounts The

# Solutions to Inventory Management Practice Problem .ppt -...

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Solution to the Inventory Management Practice Problems

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EOQ and Quantity Discounts The maintenance department of a large hospital uses about 816 cases of liquid cleaner annually. Ordering costs are \$12, carrying costs are \$4 per case per year, and all the new price schedule indicates that orders of less than 50 cases will cost \$20 per case, 50 to 79 cases will cost \$18 per case, 80 to 99 cases will cost \$17 per case, and larger order will cost \$16 per case. Determine the optimal order quantity and the total cost.
Constant Carrying Costs D= 816 cases, S= \$12, H= \$4 per case per year 1.Compute the minimum Q 2.What order yields the minimum cost

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SOLUTIONS 1.Economic Order Quantity : \$70 2.TC(70)= \$14,968 3.TC(80)=\$14,154 4.TC(100)= \$13,354
Variable Carrying Costs Surge Electric uses D= 4000 switches a year, S= \$30, H= .40P Prices of switches: - 1 to 499, P= \$0.90, H= .40(0.90)= .36 - 500 to 999, P=\$0.85, H=.40(0.85)=.34 - 1000 or more, P=\$0.80, H=.40(0.80)=.32 Determine the optimal order quantity and the total annual cost.

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Economic Order Quantity 1.EOQ (.80, .32) = 866 Switches, UNFEASIBLE 2.EOQ (.85, .34) = 840 Switches, FEASIBLE TC (840) = \$3,686 TC(1000)= \$3,480
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