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In-Class Excercise Solution

# In-Class Excercise Solution - The firm makes its own wheels...

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EXAMPLE 2 A local distributor for a national tire company expects to sell approximately 9,600 steel- belted radial tires of a certain size and tread design next year. Annual carrying cost is \$16 per tire, and ordering cost is \$75. The distributor operates 288 days a year. a. What is the EOQ? b. How many times per year does the store reorder? c. What is the length of an order cycle? d. What is the total annual cost if the EOQ quantity is ordered? SOLUTION D = 9,600 tires per year H = \$16 per unit per year S = \$75 a. TC = Carrying cost + Ordering cost = ( Q /2) H + ( D / Q ) S = (300/2)16 + (9,600/300)75 = \$2,400 + \$2,400 = \$4,800

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EXAMPLE 4 A toy manufacturer uses 48,000 rubber wheels per year for its popular dump truck series.
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Unformatted text preview: The firm makes its own wheels, which it can produce at a rate of 800 per day. The toy trucks are assembled uniformly over the entire year. Carrying cost is \$1 per wheel a year. Setup cost for a production run of wheels is \$45. The firm operates 240 days per year. Determine the a. Optimal run size. b. Minimum total annual cost for carrying and setup. c. Cycle time for the optimal run size. d. Run time. SOLUTION D = 48,000 wheels per year S = \$45 H = \$1 per wheel per year p = 800 wheels per day u = 48,000 wheels per 240 days, or 200 wheels per day a. b. Thus, you must first compute I max : c. d....
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