Question: Sample problem: 1. A company that sells pump housings would like to reduce its inventory cost by determining the optimal # of housings to obtain
Sample problem:
1. A company that sells pump housings would like to reduce its inventory cost by determining the optimal # of housings to obtain per order. The annual demand is 1,000 units, the ordering cost is Php10/order and the average carrying cost/unit/year is Php0.50. What are the EOQ and total cost/year?
a) Given the following:
Annual demand = 50,000 units
Order cost = Php14/order
Annual unit carrying cost = 22% of unit purchase price
Unit purchase price = Php2.00 for lot sizes of 1 to 1,999
Php1.00 for lot sizes of 2,000 to 4,999
Php0.60 for lot sizes of 5,000 or more units
What should the order quantity be?
b)
D = 2,400
S = Php10/order
H = Php3.33/unit/year
VENDOR A VENDOR B
QTY PRICE QTY PRICE
1- 49 Php35.00 1 - 74 Php34.75
50 - 74 34.75 75 - 149 34.00
75 - 149 33.55 150 - 299 32.80
150 - 299 32.35 300 - 499 31.60
300 - 499 31.15 500 or more 30.50
500 or more 30.75
VENDOR C VENDOR D
QTY PRICE QTY PRICE
1 - 99 Php34.50 1 - 199 Php34.25
100 - 199 33.75 200 - 399 33.00
200 - 399 32.50 400 or more 31.00
400 or more 31.10
From whom will you order and at what quantity?
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