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    Chap17 Answers

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    Sapna Sharma
    This document contains examples of calculating the economic order quantity (EOQ) and re-order point for inventory management. It provides the formulas and steps to determine the optimal order quantity that minimizes total inventory costs by balancing ordering and holding costs. For one example, the optimal order quantity is determined to be 225 units at a cost of $19 per pound, as it results in lower total costs than ordering 1000 units at $18 per pound. The document also calculates re-order points using the formula that adds lead time demand and a safety stock based on demand variability.

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    Chap17 Answers

    Uploaded by

    Sapna Sharma
    16 views3 pages
    This document contains examples of calculating the economic order quantity (EOQ) and re-order point for inventory management. It provides the formulas and steps to determine the optimal order quantity that minimizes total inventory costs by balancing ordering and holding costs. For one example, the optimal order quantity is determined to be 225 units at a cost of $19 per pound, as it results in lower total costs than ordering 1000 units at $18 per pound. The document also calculates re-order points using the formula that adds lead time demand and a safety stock based on demand variability.

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    This document contains examples of calculating the economic order quantity (EOQ) and re-order point for inventory management. It provides the formulas and steps to determine the optimal order quantity that minimizes total inventory costs by balancing ordering and holding costs. For one example, the optimal order quantity is determined to be 225 units at a cost of $19 per pound, as it results in lower total costs than ordering 1000 units at $18 per pound. The document also calculates re-order points using the formula that adds lead time demand and a safety stock based on demand variability.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    16 views3 pages

    Chap17 Answers

    Uploaded by

    Sapna Sharma
    This document contains examples of calculating the economic order quantity (EOQ) and re-order point for inventory management. It provides the formulas and steps to determine the optimal order quantity that minimizes total inventory costs by balancing ordering and holding costs. For one example, the optimal order quantity is determined to be 225 units at a cost of $19 per pound, as it results in lower total costs than ordering 1000 units at $18 per pound. The document also calculates re-order points using the formula that adds lead time demand and a safety stock based on demand variability.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    of 3

    CHAPTER 17

    Problems

    9. a. Qopt =

    b.

    2 DS
    =
    H

    2(1000)10
    = 100 units
    2

    TC @ Q =100 =

    D
    Q
    1000
    100
    S+ H =
    10 +
    2 = $200
    Q
    2
    100
    2

    TC @ Q =500 =

    D
    Q
    1000
    500
    S+ H =
    (10 100) +
    2 = $320
    Q
    2
    500
    2

    Therefore, forgo the discount, it is still cheaper to order 100 units at a time.

    12. a. Qopt =

    2 DS
    =
    H

    b. Ordering cost =

    c. Holding cost =

    2(2000)10
    = 89.44 89
    5

    D
    2000
    S=
    (10) = $224.72
    Q
    89
    Q
    89
    H = (5) = $222.50
    2
    2

    14.
    Quantity range
    Less than 100
    pounds
    100 to 1,000
    pounds
    More than 1,000
    pounds

    Note: EOQ =

    2 DS
    iC

    Cost (C)
    $20 per
    pound
    $19 per
    pound
    $18 per
    pound

    EOQ
    219
    pounds
    225
    pounds
    231
    pounds

    Feasible
    No
    Yes
    No

    Q $20 / pound =

    2DS
    2(3000)40
    =
    = 219.08 219 pounds
    iC
    0.25( 20 )

    Q $19 / pound =

    2DS
    2(3000)40
    =
    = 224.78 225 pounds
    iC
    0.25(19 )

    Q $20 / pound =

    2DS
    2(3000)40
    =
    = 230.94 231 pounds
    iC
    0.25(18)

    Therefore, calculate total cost at Q=225, C=$19, and at Q=1000, C=$18

    TC Q=225,C=19 = DC +

    D
    Q
    3000
    225
    S + iC = 3000(19) +
    40 +
    (.25)19 = $58,067.71
    Q
    2
    225
    2

    TC Q=1000,C=18 = DC +

    D
    Q
    3000
    1000
    S + iC = 3000(18) +
    40 +
    (.25)18 = $56,370.00
    Q
    2
    1000
    2

    The best order size is 1,000 units at a cost of $18 per pound.

    16. a. Q opt =
    b. L =

    2DS
    =
    H

    2(5000)10
    = 408.25 408 bottles
    .20(3)

    L 2 = 3(30) 2 = 51.96 52 bottles

    From Standard normal distribution (Appendix E), z = 1.65

    R = d L + z L = 100(3) + (1.65)52 = 300.00 + 85.80 = 385.80 386 bottles

    Inventory Control

    17. a. Q opt =
    b. L =

    2DS
    =
    H

    2( 2400)5
    = 77.46 77 sets
    4

    L 2 = 7(4) 2 = 10.583 sets

    From Standard normal distribution (Appendix E), z = 2.10

    R = d L + z L = (2400/365)(7) + (2.10)10.583 = 46.03 + 22.22 =68.25 68 sets


    Order 77 sets when the inventory position reaches 68 sets.

    29.
    Item number
    5
    3
    4
    7
    9
    1
    8
    10
    6
    2
    Total

    Average monthly
    Monthly usage
    Price per unit
    demand
    ($)
    4,000
    2,000
    1,100
    3,000
    500
    700
    2,500
    1,000
    100
    200

    21
    12
    20
    2
    10
    6
    1
    2
    10
    4

    84,000
    24,000
    22,000
    6,000
    5,000
    4,200
    2,500
    2,000
    1,000
    800
    151500

    % of Total
    Monthly
    Usage
    55.4%
    15.8%
    14.5%
    4.0%
    3.3%
    2.8%
    1.7%
    1.3%
    0.7%
    0.5%

    Class
    A
    A or B
    B
    B
    B
    B or C
    C
    C
    C
    C

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