BA 3320
Dr. Campbell
BA 3320  Review Problems
1. Suppose a firm that makes training videos uses 600 blank video tapes per month on average.
They order the blank video tapes from a supplier for $2 per tape.
The order cost is $44 and the
cost to hold a video tape for one year is $0.44.
a) What is the best order amount to minimize total cost?
b) What is the total cost?
c) How many orders are made each year?
d) What would be the total cost if they order once each month?
e) Suppose the tape supplier offers a reduced price of $1 per tape for orders of 1500 or more,
and a superreduction to $0.50 per tape for orders of 2200 or more.
The holding cost for a tape
is 22% of the price per year. How large should be order size to minimize total costs?
2. A company manufactures three styles of calculators.
The basic calculator has a forecast
demand of 5200 per year and costs $10. The setup cost for the basic calculator is $120 and the
holding cost in $1.50 per year.
Basic calculators can be produced at the rate of 150 per day.
Assume 260 days per year.
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 Winter '03
 JamesCampbell
 $10, $1.50, $1.5, blank video tapes, basic calculators

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