HW03-F08_Key_hu

HW03-F08_Key_hu - MGMT 460: HW 03 40 Points (Due: October...

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HW03 F08_Key_hu.doc 1 MGMT 460: HW 03 40 Points (Due: October 20, 2008) Page numbers given below (at the end of inventory management chapter) refer to the print edition of the text, the page number may be slightly different for the e-edition. Do not write only answers, show calculations. Question 1: EOQ (15 points) For a product satisfying EOQ assumptions, monthly demand is 800, per unit purchase price of the product is 100 dollars and the annual holding cost per unit is 15.8% of the purchase price and the ordering cost is $300. (In all cases except part (c), lead-time is zero ). (a) For the lot sizes 250, 500, 750 and 1000 calculate annual inventory cost using a table similar to the one below (add rows as needed). What is the best ordering policy out of these four lot sizes? Ordering Policy Number of Orders/year Ordering Cost [$/year] Avg. Inventory [units] Holding Cost [$/year] AIC [$/year] [0, 250] 800*12/250=38.4 38.4*300=11520 250/2=125 0.158*100*125=1975 13495 [0,500] 19.2 5760 250 3950 9710 [0.750] 12.8 3840 375 5925 9765 [0,1000] 9.6 2880 500 7900 10780 [0,500] is the best ordering policy. (b) Draw the graphs of annual cost for holding, ordering and annual inventory cost vs. lot size (for lot
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HW03-F08_Key_hu - MGMT 460: HW 03 40 Points (Due: October...

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