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Assignment Ch12(b)

Assignment Ch12(b). A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per unit per year. D= 3400, S= 100, H=.51

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Assignment Ch12(b)

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  1. Assignment Ch12(b) A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per unit per year. D= 3400, S= 100, H=.51 a) The supplier has just announced that orders of 1000 pounds and more will be filled at a price of $2 per pound. Determine the order size that will minimizes the total cost. b) If the supplier offered a discount at 1500 pounds instead of 1000 pounds, what order size will minimize total cost?

  2. Ordering and Carrying Costs The Total-Cost Curve is U-Shaped Annual Cost Ordering Costs Order Quantity (Q) QO (optimal order quantity)

  3. Ordering, Carrying, and Purchasing Costs Adding Purchasing costdoesn’t change EOQ PD Cost TC with PD TC without PD 0 Quantity EOQ

  4. Price Discount p1 p2 Cost 0 Quantity

  5. Total Cost Including Purchasing Cost p1 p2 Cost 0 Quantity EOQ

  6. Price Breaks: EOQ Preferred Cost 0 Quantity EOQ

  7. Price Breaks: Discount Point Preferred Cost 0 Quantity Q

  8. Price Breaks: EOQ Preferred Cost 0 Quantity EOQ

  9. The Problem: Part A A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per unit per year. D=3400, S= 100, H=.51 a) The supplier has just announced that orders of 1000 pounds and more will be filled at a price of $2 per pound. Q P 0-999 3 ≥1000 2 DONE

  10. The Problem: Part B A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order and pays $3 per pound. The ordering cost is $100 and inventory carrying cost is 51 cents per unit per year. D=3400, S= 100, H=.51 b) Determine the order size that will minimizes the total cost. If the supplier offered a discount at 1500 pounds instead of 1000 pounds, what order size will minimize total cost? Q P 0-... 3 ≥1500 2

  11. The Problem: Part B b) If the supplier offered a discount at 1500 pounds instead of 1000 pounds, what order size will minimize total cost? Q P 0-... 3 ≥1500 2 D= 3400, S=100, H= .51 TC = HQ/2 + SD/Q + PD TC ( Q = 1155 , P = 3) = 0.51(1155)/2 + 100(3400)/1155+ 3(3400) TC = 294.5 + 294.5 + 10200 = 10789 TC ( Q = 1500 , P = 2) = 0.51(1500)/2 + 100(3400)/1500 + 2(3400) TC = 382.5+226.7 +6800 = 7409.2

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