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  need to compute how many batches should be produced in a month, which gives us the total setup 
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This note was uploaded on 10/16/2011 for the course OM 335 taught by Professor Jonnalagedda during the Fall '08 term at University of Texas.

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P16_L23_CandleStore - OM335Fall2008 P16:CandleStore ,.

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