Midterm_1_Solutions (1)

Midterm_1_Solutions (1) - IEOR 150 Midterm I Fall 2009...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
IEOR 150 Midterm I Fall 2009 Problem 1 (25 points) A coffee shop in San Francisco sells Cappuccino at a fairly steady rate of 1000 pounds annually. Assume one pound of Cappuccino is made from 0.25 pound of some certain coffee beans. The beans are purchased from a local supplier for $2.70 per pound. The setup cost for this coffee shop to place an order from its supplier is $50. The holding cost for coffee beans is based on a 20 percent annual interest rate. a. Determine the optimal order quantity for the coffee beans. (10 points) b. If the replenishment lead time is three weeks, determine the recorder level based on the on-hand inventory. (5 points) c. The current reorder policy is to buy the coffee beans once a year, what is the additional cost incurred by this policy. (10 points) Solution a. 50 K = 1000 0.25 250 2.7 0.2 0.54 h λ = × = = × = So, the optimal order quantity should be 2 2 50 250 * 215 0.54 K Q h λ × × = = = b. The reorder point should be 250*3 / 52 14.42 15 R λτ = = = c. Average annual cost for setup cost and holding cost under optimal order policy is 50 250 0.54 215 * 116.19 2 215 2 K hQ C Q λ × × = + = + = Average annual cost for setup cost and holding cost under current order policy is 50 250 0.54 250 117.5 2 250 2 K hQ C Q λ × × = + = + = Additional cost is * 117.5 116.19 1.31 C C C Δ =
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern