PS1_W11_Sol - MS&E 261 Winter 2010-11 Prof. Warren H....

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MS&E 261 Prof. Warren H. Hausman Winter 2010-11 SOLUTIONS TO PROBLEM SET #1 1. λ = 280 c = 2.40 K = 45 I = .20 a) Q* = b) T = Q*/ λ = 229/280 = .8179 yrs. (= 9.81 months) c) G* = = = $109.98 d) r = λγ = (280)(3/52) = 16.15 r = 16 units 2. Since a cleanout cost of 4* $7 = $28 must be incurred each time the oven is used for 2,000 or fewer lbs, any quantity larger than 2,000 lbs. would be sub-optimal; it would result in higher inventory carrying costs with no reduction in setup costs. For example, if the batch size is 4,000 lbs instead of 2,000 lbs, then the annual setup cost is unchanged but the inventory holding cost is twice as high. Thus, we need to check only for possible order quantities
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PS1_W11_Sol - MS&E 261 Winter 2010-11 Prof. Warren H....

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