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Test2-PartialKey_F10

# Test2-PartialKey_F10 - MGMT 361 Fall 2010 Test 2 Question...

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Test2-PartialKey_F10.doc MGMT 361: Fall 2010 Test 2 Question 2 [ 20 points: 10, 15 ] Part (A): EOQ Demand for a product satisfying EOQ assumptions is 8000 units / year. Purchase price is \$40 /unit. Ordering cost is \$100 and holding cost is \$10/unit / year. Suppose your current policy is to order every 3 months. How much will you save annually if you order optimal quantity (round off optimal number within 5%, if needed)? Current Q = 8000/4 = 2000 units. AIC(2000) = 100 * (8000/2000) + ½ * 2000 * 10 = 400 + 10000 = \$10,400 Q0 = SQRT(2 * 8000 * 100 / 10) = 400. AIC(400) = 100 * (8000/400) + ½ * 400 * 10 = 2000 + 0000 = \$4000. So there will be annual saving of \$6400. Part (B): EOQ with discounts Demand for a product satisfying EOQ assumptions is 12000 units / year. Purchase price is \$50 /unit. Ordering cost is \$180 and holding cost is \$12.0/unit / year. The vendor is willing to give you 3% discount if you buy at least 3000 units in a lot. The discount is 5% if you buy at least 6000. How many units should you buy in a lot and what is the annual total cost? Note that holding cost is not affected by the discount. You can show calculations in the last column for dark cells. For other cells, you can write the answers.

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