Lecture 2 Notes

# If the interest rate is i per unit of time than q for

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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 Michigan-Dearborn.

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