Production and Operations Analysis, Seventh Edition
7th Edition
ISBN: 9781478623069
Author: Steven Nahmias, Tava Lennon Olsen
Publisher: Waveland Press, Inc.
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Chapter 8, Problem 42AP
Summary Introduction
Interpretation: The order policy for the buttons by using silver metal method is to be determined.
Concept Introduction:
The optimal order policy is known as economic order quantity (EOQ) which is used to order the different quantities in such way that minimizes the holding cost and ordering cost.
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A single inventory item is ordered from an outside supplier. The anticipateddemand for this item over the next 12 months is 6, 12, 4, 8, 15, 25, 20, 5, 10, 20, 5,12. Current inventory of this item is 4, and ending inventory should be 8. Assume aholding cost of $1 per period and a setup cost of $40. Determine the order policyfor this item based onb. Least unit cost
The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the correct ordering policy (give optimal order quantity), given the following price breaks for purchasing the item? What price should the firm pay per unit? What is the total annual cost at the optimal behavior?
Quantity: Price:
1-9 $2.95 per unit
10-999 $2.50 per unit
1,000-4,999 $2.30 per unit
5,000 or more $1.85 per unit
Penalty costs can be assessed only against the number of units of demand that cannot be satisfied, or against the number of units weighted by the amount of time thatan order stays on the books. Consider the following history of supply and demandtransactions for a particular part:Number of Items Demand duringMonth Received MonthJanuary 200 520February 175 1,640March 750 670April 950 425May 500 280June 2,050 550Assume that starting inventory at the beginning of January is 480 units.a. Determine the ending inventory each month. Assume that excess demands areback-ordered.b. Assume that each time a unit is demanded that cannot be supplied immediately,a one-time charge of $10 is made. Determine the stock-out cost incurred duringthe six months (1) if excess demand at the end of each month is lost, and (2) ifexcess demand at the end of each month is back-ordered.c. Suppose that each stock-out costs $10 per unit per month that the demandremains unfilled. If demands are filled on a first-come,…
Chapter 8 Solutions
Production and Operations Analysis, Seventh Edition
Ch. 8.1 - Prob. 1PCh. 8.1 - Prob. 2PCh. 8.1 - Prob. 3PCh. 8.1 - Prob. 4PCh. 8.1 - Prob. 5PCh. 8.1 - Prob. 6PCh. 8.1 - Prob. 7PCh. 8.1 - Prob. 8PCh. 8.1 - Prob. 9PCh. 8.2 - Prob. 10P
Ch. 8.2 - Prob. 11PCh. 8.2 - Prob. 12PCh. 8.2 - Prob. 13PCh. 8.2 - Prob. 14PCh. 8.2 - Prob. 15PCh. 8.2 - Prob. 16PCh. 8.2 - Prob. 17PCh. 8.2 - Prob. 18PCh. 8.2 - Prob. 19PCh. 8.2 - Prob. 20PCh. 8.2 - Prob. 21PCh. 8.2 - Prob. 22PCh. 8.3 - Prob. 23PCh. 8.3 - Prob. 24PCh. 8.3 - Prob. 25PCh. 8.4 - Prob. 26PCh. 8.4 - Prob. 27PCh. 8.4 - Prob. 28PCh. 8.4 - Prob. 29PCh. 8.5 - Prob. 30PCh. 8.5 - Prob. 31PCh. 8.5 - Prob. 32PCh. 8.5 - Prob. 33PCh. 8.5 - Prob. 34PCh. 8.6 - Prob. 35PCh. 8.6 - Prob. 36PCh. 8.6 - Prob. 37PCh. 8.6 - Prob. 38PCh. 8.6 - Prob. 39PCh. 8.6 - Prob. 40PCh. 8 - Prob. 41APCh. 8 - Prob. 42APCh. 8 - Prob. 43APCh. 8 - Prob. 44APCh. 8 - Prob. 45APCh. 8 - Prob. 46APCh. 8 - Prob. 48APCh. 8 - Prob. 49APCh. 8 - Prob. 50APCh. 8 - Prob. 51AP
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- Suppose demand is know and constant at 500 units per year (one year has 250 working days). The holding cost is $2 per unit per year and the ordering cost is $20 per order. Also assume that the lead time is 10 days. Compute the optimal order quantity (EOQ) and the optimal annual inventory cost. Draw a picture of the evolution of the inventory level with time. Indicate the ROP on the picture as well as the length of the cycle. Now assume that the lead time is 90 days. Indicate the ROP on the picture.arrow_forwardThe annual demand, ordering cost, and the annual inventory carrying cost rate for a certain item are 600 units, Quantity 1 to 49 50 to 249 250 and up Price $5.00/unit $4.50/unit $ 4.10/unit $20/order and 30% of item price, respectively. (a) Assume the discounts applied to all the units in the order, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost. (b) Assume the discounts applied to the units are incremental, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost.arrow_forwardThe president of Value Filters became very enthusiastic about using EOQs to plan the sizes of her production runs, and instituted lot sizing based on EOQ values before she could properly estimate costs. For one particular filter line, which had an annual demand of 1,800 units per year and which was valued at $2.40 per unit, she assumed a holding cost based on a 30 percent annual interest rate and a setup cost of $100. Some time later, after the cost accounting department had time to perform an analysis, it found that the appropriate value of the interest rate was closer to 20 percent and the setup cost was about $40. What was the additional average annual cost of holding and setup incurred from the use of the wrong costs?arrow_forward
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