Chapter 9 SUPPLEMENT C
1)
Annual demand =2750 rolls
Cost/roll=875
Holding Cost=12%
Order cost=45
a) How many rolls should yellow press order at a time?
The Economic Order Quantity is
EOQ= (2DS/H)1/2
D= Demand in rolls/year
s=Cost/order =45
H= Cost/roll * annual holding cost
=875*0.12= 105
= (2*2750*45/105)1/2
=48.55
=49 rolls at a time
b) Find time between orders? (Assume 365 workdays/yr)
The time between order (TBO), expressed in days is:
TBOEOQ = EOQ/D (365workdays/year)
= (49 / 2750)*365
=6.503636
=6.5 days
2) Babble Inc buys 425 blank tapes/month
Ordering Cost= 11.75
Holding Cost=0.25/cassette per year
- How many tapes should Babble order at a time?
Economic Order Quantity= EOQ= ?
Demand in tapes/year = D =425*12= 5100 Tapes
Ordering Cost= S= 11.75
Holding cost/per tape per year =H=0.25
EOQ= (2DS/H)1/2
EOQ= (2*5100*11.75/0.25)1/2
=692.387
=692 Tapes
B) What is the time between orders (TBO)?
TBOEOQ = EOQ/D =692/425 =1.628235 =1.6
Rough:
EOQ50.15 =(2*5100*11.75/0.25)1/2
3)
Price Range | Lower Quantity | Upper Quantity | Price per Unit |
1 | 1 | 999 | $7.55 |
2 | 1,000 | 4,999 | $7.35 |
3 | 5,000 | 999999 | $6.60 |
EOQ = Economic Order Quantity
D= Annual Demand =320 *50
S= Annualset-up cost/lot=100
H= Annual holding cost/unit=38%
- Calculate EOQ for lowest price in table
EOQ= (2DS/H)1/2
EOQ6.60 = (2*320*50*100/0.38*6.60)1/2
=1129.564
=1130 baseballs
Solution is infeasible as 1130 units corresponds to price of $7.35/unit and not $6.60/unit
- Calculate EOQ for next higher price in table
EOQ7.35 = (2*320*50*100/0.38*7.35)1/2
=1070.383785
=1070 baseballs
Solution is feasible as 1070 units rightly corresponds to $ 7.35/unit
We will now determine whether total cost can be reduced by purchasing 5000 baseballs that corresponds to lowest price/unit. For this, we need to find total annual cost given the lot size is 1070 baseballs.
P= Price per purchased unit
CQ = (Q/2)* H + (D/Q) *S + PD
C1070 = (1070/2)*0.38*7.35 + (320*50)/1070 *100 + 7.35*320*50
=1494.255 + 1495.327103 +117600
=120589.582
=120590
Now, the total annual cost at the lot size of 5000 baseballs
CQ = (Q/2)* H + (D/Q) *S + PD
C5000 = (5000/2)* 0.38* 6.60 + (320*50)/5000 *100 + 6.60*320*50
= 6270 + 320 + 105600
=112190
Thus, Team should buy 5000 baseballs/order
- If it buys 15000 baseballs or more, price drops to $6.35/unit. Should we revise the order?
Calculate EOQ at lowest price of $6.35/unit
EOQ= (2DS/H)1/2
EOQ6.35 = (2*320*50*100/0.38*6.35)1/2
=1151.58
=1152
Not feasible as 1152 units corresponds to price of $ 7.35/unit
- We can find whether total cost can be reduced by purchasing 15000 baseballs that corresponds to lowest per unit cost.
- CQ = (Q/2)* H + (D/Q) *S + PD
C15000 = (15000/2)* 0.38* 6.35 + (320*50)/15000 *100 + 6.35*320*50
=18097.5 +106.66 + 101600
=119804.16
=119804
Comparing this result to optimal result we obtained in (a)i.e 112190 concludes that team should buy 5000 baseballs/order
Chapter 11 –Location
1.
Factor Score for Each Location | |||||
Factor | Weight | A | B | C | D |
1. Labor climate | 5 | 2 | 4 | 3 | 5 |
2. Quality of Life | 30 | 3 | 3 | 4 | 4 |
3. Transportation systems | 5 | 2 | 2 | 1 | 5 |
4. Proximity to markets | 25 | 1 | 4 | 4 | 3 |
5. Proximity to materials | 5 | 5 | 5 | 3 | 2 |
6. Taxes | 15 | 5 | 1 | 2 | 2 |
7. Utilities | 15 | 1 | 4 | 1 | 3 |