Question: Formulas: Total Inventory Cost = TIC Total Order Cost = TOC Total Carry Cost = TCC Fixed Order Cost = FOC Annual Demand (Units) =
Formulas: Total Inventory Cost = TIC Total Order Cost = TOC Total Carry Cost = TCC Fixed Order Cost = FOC Annual Demand (Units) = U Whole Sale Purchase Price (or Unit Cost) = PP Annual Carry Cost (% of PP) = CC TOC = FOC * U/Q TCC =(Q/2) * CC * PP Order Quantity = Q TIC = TOC + TCC = (FOC * (U/Q) + ((U/2) * CC * PP) Cost Minimizing Q = SQRT((FOC * U * 2) / (CC * PP)) = Q* note: this is derived by setting the first derivitive of TIC to 0. Reorder Point = (U/365) * lt = ROP Input Data Annual Unit = U Purchase Price = PP Fixed Order Cost = FOC Carry Cost = CC Order Lead Time (in days) = LT Objective: Find the order quantity that minimizes the total cost of managing inventory.
| Solution: | ||||||
| Q* = | ||||||
| TCC = | ||||||
| TOC = | ||||||
| TIC = | ||||||
| ROP = | units | |||||
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