operates 200 days a year.
(Note:
1 ton =2,000 pounds)
.
p = 50 tons/day
u = 20 tons/day
,
200 days/yr
.
D=
20 tons/day
x 200days/yr.
= 4,000 tons/yr
S = $100
H = $5/ton per yr.
p>u
7
Page 565 Economic Production Quantity (EPQ) Total Cost
No. 10/595a.
a. How many
bags per run
are optimal?
p = 50 tons/day
u = 20 tons/day
,
200 days/yr
.
D=
20 tons/day
x 200days/yr.
= 4,000 tons/yr
S = $100
H = $5/ton per yr.
bags]
[10,328
tons
40
.
516
20
50
50
5
100
)
000
,
4
(
2
u
p
p
H
DS
2
Q
0
=

=

=
b. What would the
average
inventory
be for this lot
size?
]
bags
8
.
196
,
6
.
approx
[
tons
84
.
309
)
30
(
50
4
.
516
)
u
p
(
P
Q
I
max
=
=

=
Average is
92
.
154
2
48
.
309
:
2
I
max
=
tons [approx. 3,098 bags]
c.
Determine the approximate
length of a production run
, in day
Run length
days
33
.
10
50
4
.
516
P
Q
=
=
d.
About how many runs per year
would be there?
8
Page 565 Economic Production Quantity (EPQ) Total Cost
d.
About how many runs per year would be there?
Runs per year:
8]
approx.
[
7.75
4
.
516
000
,
4
Q
D
=
=
p = 50 tons/day
u = 20 tons/day
,
200 days/yr
.
D=
20 tons/day
x 200days/yr.
= 4,000 tons/yr
S = $100
H = $5/ton per yr.
e.
How much could the save annually if the setup cost could be
reduce to $25 per run?
If Q
= 516.40 tons;
S
Q
D
H
2
I
max
+
TC =
TC
orig
. = $1,549.00
If S=$25
Q
′
= 258.2
TC
rev
.
= $
774.50
Savings would be $774.50
u
p
p
H
DS
Q
p

=
2
*
Pls. check answers
9
Page 571 Reorder Point: Under
Certainty
)
as
units
time
same
(in
time
Lead
LT
per week)
day,
per
period,
per
(units
rate
Demand
where
LT
ROP
d
d
d
=
=
×
=
12.10/571
Next Topic
10
Page 556 ABC Classification
System
•
ABC approach
–
Classifying inventory according to some measure of importance,
and allocating control efforts accordingly
–
A items
(very important)
•
10 to 20 percent of the number of items in inventory and about 60 to
70 percent of the annual dollar value
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 Management, Economic Order