MGMT 361

# MGMT 361 - Key MGMT 361 HW 03 40 Points Question 1[16...

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HW03-Key-F10.doc 1 MGMT 361: HW 03 40 Points Question 1: [16 points: 4 + 4 + 8] For a product satisfying EOQ assumptions, annual demand is 5400 units, holding cost per unit per year is \$5 and the ordering cost is \$110. (a) For the lot sizes 200, 400, 600 and 800 calculate annual inventory cost using a table similar to the one in Example 1.1. What is the best lot size out of these four lot sizes? (b) Draw the graphs of annual cost for holding, ordering and annual inventory cost vs. lot size (for lot sizes between 100 and 1000). Use EXCEL to prepare the graph. Label the graph appropriately. Use original information in the first two lines to answer the following (c) Calculate the optimal lot size , based on the information above ( round off optimal Q 0 to the closest multiple of 100 ). 1. What are the corresponding annual inventory costs ? 2. What is the best policy if the lead-time ( LT ) is 2 months? 3. Suppose your order must be a multiple of 150 (that is, each box contains 150 units). What should be the “optimal” ordering policy in this case (with LT = 2 months)?

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