OPIM101 - Spring 2012 - R4 exercise - solutions

# OPIM101 - Spring 2012 - R4 exercise - solutions - OPIM 101...

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Recitation 4 Exercise - Solutions Section # (201,202,…,214 ): _____________ Instructor (circle): Balas Fishman Horowitz Saunders Shah Zhang PennCard Last Name: PennCard First Name: PennID: Place your answers in the boxes provided. Joe’s Beer, Bait, & Tackle Co. is a small chain of fishing tackle stores in northern Minnesota. Joe needs to purchase malt for his micro-brew production. His supplier charges \$35 per delivery (no matter how much is delivered) and \$1.20 per gallon. Joe’s annual holding cost per unit is 35% of the dollar value of the unit. Joe uses 5000 gallons of malt per week. Assume 52 weeks per year. Q1. Suppose Joe orders 18000 gallons of malt per order. On average, what is the dollar value of his malt inventory? Q2. Calculate the weekly holding cost for one gallon of malt. (HINT: Given we are trying to calculate the weekly holding cost that would enter into the EOQ equation, fixed costs are excluded.) Weekly holding cost per gallon (h) = (35%/52)*(\$1.20) = \$0.0081 \$0.0081 \$10800 Average inventory = 18000/2=9000 gallons Average dollar value of inventory = 9000 * 1.20 =\$10800

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OPIM101 - Spring 2012 - R4 exercise - solutions - OPIM 101...

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