Unformatted text preview: er quantity and frequency are independent of this unit cost
That is not the case, for example, if we take into account the time value of money that is tied up in inventory. If the interest rate is i % per unit of time, than Q = for derivation of this formula.
2aK h+ic . See homework Often, however, discounts and economies of scale are available if large batches are ordered. In the TV example, suppose that the unit cost of every speaker is
c1 = $11 if fewer than 10,000 speakers are produced, c2 = $10 if production is at least 10,000, but fewer than 80,000 speakers, and c3 = $9 if production is 80,000 speakers or more.
Page 11 What is the optimal inventory policy?
IOE 202: Operations Modeling, Fall 2009 Space Quantity discounts, step I
From our discussion of the EOQ model, the total cost per month if the unit cost was cj can be computed as follows: Tj (Q ) = aK hQ + acj + , for j = 1, 2, 3. Q 2 Let’s plot these three curves! The value of Q that minimizes Tj (Q ) can be found by using ...
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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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