A6.docx - Q1 D = 12,000 units per year CO(ordering cost = \$25 per order C(purchase cost = \$2.5 per unit Ch(holding cost = 0.2*\$2.5 = \$0.5 per unit per

# A6.docx - Q1 D = 12,000 units per year CO(ordering cost =...

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Q1: D = 12,000 units per year C O (ordering cost) = \$25 per order C (purchase cost) = \$2.5 per unit C h (holding cost) = 0.2%*\$2.5 = \$0.5 per unit per year Type the data in the Excel QM spreadsheet: (a) The optimal order size is Q* = 2 DC o C h = 2 12000 25 0.5 = 1095.45 1096 units (b) The reorder point is R* = LD = 5*(12,000/250) = 240 (c) The cycle time T* = Q*/D = 1095.45/12000 = 0.0913(year) * 250 working days ≈ 23 (days) (d) The total annual holding costs = C h Q 2 = \$ 0.5 1095.45 2 = \$ 273.86
The total annual ordering cots = C o D Q = \$ 25 12000 1095.45 = \$ 273.86 The total annual holding cost and annual ordering cost are \$273.86 + \$273.86 = \$547.72. Q2: D = 1,700 shirts per year C O (ordering cost) = \$120 per order C (purchase cost) = \$38 per shirt C h (carrying cost) = 25% per year per shirt Type the data in the Excel QM spreadsheet: (a) From the excel QM, when the order quantity is Q* = 500, the total cost is minimum at T C = \$64,704 (b) The holding cost C h = 0.25*\$38 = \$9.5 The total cost of current policy bookstore uses Tc = C o D Q + C h Q 2 + DC = \$ 120 1700 200 + \$ 9.5 200 2 + 1700*\$38 = \$66,570
The annual savings of this inventory policy over the policy the bookstore currently uses is \$66,570 - \$64,704 = \$1,866 Q3: D = 1,000 bottles per year

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• One '18
• Christopher O'Donnell

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