Lecture 2 Notes

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Unformatted text preview: 2aK ￿= the basic EOQ model: Q h = 25,298. Q ￿ is the same for all the curves. ￿ ￿ This is because the cost of capital is not taken into account, and so the effect of different values of inventory is not felt. If the cost of capital is not 0, one must use the formulas ￿ aK Qj￿ = h2+icj — in this case, the points at which each cost curve is minimized would be different! Page 12 IOE 202: Operations Modeling, Fall 2009 Space Cost per unit of time with quantity discounts Cost per unit of time with quantity discounts $105,000 $11.00 $10.00 $9.00 $100,000 Total cost per unit of time $95,000 $90,000 $85,000 $80,000 $75,000 0 10,000 20,000 30,000 40,000 50,000 Batch size Q 60,000 70,000 80,000 90,000 100,000 IOE 202: Operations Modeling, Fall 2009 Page 13 Space Quantity discounts, step II ￿ The minimizing value Q ￿ =25,298 is feasible for the cost function T2 (Q ), whose value at this point is T2 (Q ￿ ) =$87,589. Note that for any value of Q , T1 (Q ) > T2 (Q ), so ordering at the cost c1 c...
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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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