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Unformatted text preview: c) Least Unit Cost heuristic Cover week 1 : Order 50 units setup cost= 120 and inv. cost= 0 => cost/unit = 120/50=2.4 Cover weeks 1&2 : Order 133 units Setup cost= 120 Inventory cost = (13350)* 1 = 83 so cost/unit= 203/133= 1. 526 < 2.4 so continue Cover weeks 1&2&3 : Order 160 units Setup cost= 120 Inventory cost = (16050)* 1 + (11083)*1 = 137 so cost/unit= 257/160= 1. 61 >1.526 so stop. So we should only cover periods 1 and 2. We start over from week 3. Cover week 3 : Order 27 units Setup cost= 120 Inventory cost = 0 so cost/unit= 120/27= 4.44 Cover weeks 3&4 : Order 82 units Setup cost= 120 Inventory cost = 55 so cost/unit= 175/82= 2.134 < 4.44 so order this quantity. So our total cost will be the cost of ordering at the beginning of week 1 and 3. That is, (120 + 83) + (120 +55) = $378 which is the lowest among options a,b, and c....
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 Fall '10
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