EXERCISE EOQ Model The ePaint Store stocks paint in its warehouse and sells it online on its Internet Web site. The store stocks several brands of paint; however, its biggest seller is Sharman-Wilson Ironcoat paint. The company wants to determine the optimal order size and total inventory cost for Ironcoat paint given an estimated annual demand of 10,000 gallons of paint, an annual carrying cost of $0.75 per gallon and an ordering cost of $150 per order. EOQ MODEL Optimal Quantity Qopt = 2 COD. Total Annual Inventory Cost v TC = COD. + Q opt Cc Qopt 2 Where: Co = Ordering Cost D = Demand Cc = Carrying Cost EXERCISE Production Quantity Model Assume that the ePaint Store has its own manufacturing facility in which it produces Ironcoat paint. The ordering Cost Co is the cost of setting up the production process to make paint. Co = $150. Recall that Cc=$0.75 per gallon and D=10,000 gallons per year. The manufacturing facility operates the same days the store is open (i.e. 311 days) and produces 150 gallons of paint per day. Determine the optimal order size and the total inventory cost PRODUCTION QUANTITY MODEL (PQM) Optimal Quantity = 2 COD Cc (1-(d/p)] Total Annual Inventory Cost TC + Co D Q Cc Q. [1-(d/p)] 2 Where: Co = Ordering cost D = demand p = production rate Cc = Carrying cost d = daily rate at which inventory is demanded