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Unformatted text preview: the setup cost) is $10, independent of the batch size produced The estimated holding cost of keeping a speaker in stock is $0.30 per month
IOE 202: Operations Modeling, Fall 2009 Page 9 Space Solution of the TV speaker problem EOQ model is appropriate in this problem Parameters: a =8,000 units per month (demand rate) L =0 (lag time between order and delivery) K =$12,000 (ﬁxed/setup cost for producing a batch) c =$10 per unit (unit ordering cost) h =$0.30 per unit per month (unit holding cost per unit of time) Hence, the optimal solution is to set up the facility to produce speakers in batches of 2aK 2 ∗ 8000 ∗ 12000 Q = = = 25,298 h 0.30 once every t = 25298/8000 = 3.2 months. Total production/storage cost of speakers aK hQ T (Q ) = + ac + = $87589.47 per month Q 2
IOE 202: Operations Modeling, Fall 2009 Page 10 Space EOQ extension: Ordering with quantity discounts
So far, we assumed that the unit cost of an item is the same regardless of quantity in the batch. In fact, as a result, the optimal ord...
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This note was uploaded on 03/17/2010 for the course IOE 202 taught by Professor Marinaepelman during the Fall '09 term at University of MichiganDearborn.
 Fall '09
 MarinaEpelman

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