Example 1 Patterson Electronics supplies microcomputer circuitry to a company that incorporates...
6
Example 1 Patterson Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of the components has an annual demand of 250 units, and this is constant throughout the year. Carrying cost is estimated to be $1 per unit per year, and the ordering cost is $20 per order. a. To minimize cost, how many units should be ordered each time an order is placed? b. How many orders per year are needed with the optimal policy? c. What is the average inventory if costs are minimized?
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Transcript of Example 1 Patterson Electronics supplies microcomputer circuitry to a company that incorporates...
Example 1
Patterson Electronics supplies microcomputer circuitry to a company that incorporates microprocessors into refrigerators and other home appliances. One of the components has an annual demand of 250 units, and this is constant throughout the year. Carrying cost is estimated to be $1 per unit per year, and the ordering cost is $20 per order.a. To minimize cost, how many units should be ordered each time an order is placed?b. How many orders per year are needed with the optimal policy?c. What is the average inventory if costs are minimized?
Example 2
Annual demand for the Doll two-drawer filing cabinet is 50,000 units. Bill doll, president of Doll Office Suppliers, controls one of the largest office supply stores in Nevada. He estimates that the ordering cost is $10 per order. The carrying cost is $4 per unit per year. It takes 25 days between the time that Bill places an order for the two-drawer filing cabinets and the time when they are received at his warehouse. During this time, the daily demand is estimated to be 250 units.
What is the economic order quantity? What is the reorder point? What is the optimal number of orders per year?
Example 3
Rob Roller has been in charge of inventory policy at Cyclorama, a large retail bicycle shop in Orlando, Florida. He now orders Chrome-Moly frames from Frameco, a local frame supplier. Cyclorama builds each bike by adding different Shimano component groups to each frame. Currently, cyclorama's annual demand for frames is 2,000 per year. The lead-time is 10 days and the ordering cost per order is $50. The holding cost is estimated to be 25% of the unit cost. Frameco offers the following discounts:
Example 3 - Cont
PRICE BREAK
LOWER QUANTITY UNITS
UPPER QUANTITY UNITS
UNIT PRICE ($)
1 0 10 220.00 2 11 20 219.99 3 21 30 219.98 4 31 40 219.97 5 41 50 219.96 6 51 60 219.95 7 61 70 219.94 8 71 80 219.93 9 81 90 219.92
10 91 100 219.91 11 101 110 219.90 12 111 120 219.89 13 121 130 219.88 14 131 140 219.87 15 141 219.86
Example 3 - Cont
(a) What are the optimal order quantity and the total inventory cost for Cyclorama given the data?(b) Rob is optimistic about future demand. If annual demand becomes 3,000 frames, what is the impact on the optimal order quantity?
© What is the impact if the annual demand is 4,000 frames?
Example 4
Flemming Accessories produces paper slicers used in offices and in art stores. The minislicer has been one of its most popular items: Annual demand is 6750 units and is constant throughout the year. On average, Kristen can manufacture 125 minslicers per day. Demand for these slicers during the production process is 30 per day. The setup cost for the equipment necessary to produce the minislicers is $150. Carrying costs are $1 per minislicer per year. How many minislicers should Kristen manufacture in each batch?
