Lecture 2 Notes

# 30 per month ioe 202 operations modeling fall 2009

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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 Michigan-Dearborn.

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