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Unformatted text preview: IE 5351: Advanced Production and Inventory Control Homework #1 1. A company XYZ purchases air filters that are used at the rate of 350 per year. The cost of each filter is $30 and the cost of placing each order is $10. The annual inventory carrying cost rate is 18%. Shortage cost consists of two components: 1. Fixed cost of $0.30 per unit 2. Variable cost of $5 per unit short per year a) Find both the optimal order quantity and the optimal shortage b) The cycle length and the total annual cost 2. A gift shop sells Little Lentils –Cuddly animal dolls stuffed with dried lentils- at a very steady pace of 10 per day, 310 days per year. The wholesale cost of the dolls is $5, and the gift shop uses an annual interest rate of 20% to compute the holding costs. a) If the shop wants to place an average of 20 replenishment orders per year, what order quantity should it use? b) If the shop orders dolls in quantities of 100, what is the implied fixed order cost? c) If the shop estimates the cost of placing a purchase order to be $10 , what is the optimal order quantity? c) If the shop estimates the cost of placing a purchase order to be $10 , what is the optimal order quantity?...
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- Spring '10