P16_L23_CandleStore

# P16_L23_CandleStore - OM335Fall2008 P16:CandleStore ,....

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OM 335 Fall 2008 af4b2c18627ffaeb517565af6f08a6320d1384bb.doc P16: Candle Store  A shop offers a scented candle, which has a monthly demand of 900 boxes. Candles are delivered by a  supplier at a shipment cost of \$200. The supplier, candle factory, produces in batches. The setup cost for  production is \$250 per batch and the unit production cost is \$2 per box. The factory charges the store \$5  per box.  Assume that demand is uniform throughout the month, and holding cost is \$1 per box on a  monthly basis.  a) What is the optimal order quantity of the candle shop? [Hint: Solve a EOQ problem for the candle  shop with setup cost \$200, holding cost \$1, and demand rate 900.] b) What is the monthly cost of the store by ordering the quantity obtained in part a)? [Hint: Compute the  total cost of the EOQ model with setup cost \$200, holding cost \$1, demand rate 900, and unit  purchasing price \$5.] c) What is factory’s monthly profit if it is producing at a batch size obtained in part a). [Hint: We first

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