Answered: A purchasing agent for a particular…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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A purchasing agent for a particular type of silicon wafer used in the production of
semiconductors must decide among three sources. Source A will sell the silicon
wafers for $2.50 per wafer, independently of the number of wafers ordered. Source B
will sell the wafers for $2.40 each but will not consider an order for fewer than
3,000 wafers, and Source C will sell the wafers for $2.30 each but will not accept
an order for fewer than 4,000 wafers. Assume an order setup cost of $100 and an
annual requirement of 20,000 wafers. Assume a 20 percent annual interest rate for
holding cost calculations.
b. What is the optimal value of the holding and setup costs for wafers when the
optimal source is used?

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