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Unformatted text preview: Y jkm ! X k e) Formulate the constraint that stipulates that for every product j ! J and every period or week, the inventory needs are met. #j ! J ; n ! K " " a kmnY jkm = 1 m k !K 3 of 8 pages IOE 491, Service Operations Management Winter, 2012, IOE Dept, U. Michigan Name Place your name on all pages now! Problem 2: A particular Sears store expects to sell 600 room air Month Demand conditioners (or a particular model and manufacturer) per January 13 year. However, the sales are highly seasonal as shown in the February 20 table to the right. March 32 Also, suppose that the holding cost per air conditioner is $2 April 48 per month. The fixed cost of placing an order is $500. May 85 June 120 a) Suppose we place an order at the beginning of July 90 January to cover demand for the first three months of August 70 the year – January, February and March. What is the September 42 fixed plus inventory holding cost for such an order? October 35 November 29 3 5$ !1 500 + 2 " 13 + 20 + 32 % = 733 December 16 2 2& #2 Total 600 b) The table below (see next page) gives 12 values of the total annual cost (the total fixed order cost plus the holding cost) when the holding cost per item per month is $2.00. If the fixed cost per order is $500, i. How many times per year should the company be ordering? Based on the table below, you order 4 times per year and the holding cost is 1644. The fixed cost is $2,000 so the total cost is $3,644. ii. What is the total annual cost when you order this often? $3,644 c) For what value of the fixed cost should the firm switch between ordering 2 times per year and 3 times per year? Based on the table below, the critical value is a fixed cost of $1,028. 4 of 8...
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This note was uploaded on 03/26/2013 for the course IOE 491 taught by Professor Staff during the Winter '08 term at University of Michigan.

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