Your objective is to help company by determining EOQ* (Economic Order Quantity) that minimizes the total inventory cost for a company that sells ceiling fans. Your worksheet provides information about the current order quantity, demand quantity and other costs. Questions: Answer A and B a. With the current order quantity, what is the total cost of inventory? b. Implement the problem in Excel and find the order quantity (EOQ) (round to nearest integer) that gives minimum inventory cost. Note: this is a Non-linear programming, hence select “GRG Nonlinear” method in Solver - How much money would company save by switching to optimum quantity from current order quantity?

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Your objective is to help company by determining EOQ* (Economic Order Quantity) that minimizes the total
inventory cost for a company that sells ceiling fans. Your worksheet provides information about the current
order quantity, demand quantity and other costs.
Questions: Answer A and B
a. With the current order quantity, what is the total cost of inventory?
b. Implement the problem in Excel and find the order quantity (EOQ) (round to nearest integer) that gives
minimum inventory cost. Note: this is a Non-linear programming, hence select “GRG Nonlinear” method in
Solver
- How much money would company save by switching to optimum quantity from current order
quantity?

Current order quantity (Q)
Annual demand (D)
Unit holding cost (H)
Ordering cost (S)
Amount
1042
4022
19
50
Transcribed Image Text:Current order quantity (Q) Annual demand (D) Unit holding cost (H) Ordering cost (S) Amount 1042 4022 19 50
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c. Once you find the optimal order quantity i.e., EOQ, create a Data Table that generates inventory cost within ±100 units (with 10units increment) from the optimal order quantity. For example, if the EOQ=150, then you need to generate Data Table for inventory cost starting from 50 to 250 with 10 increments. Explain the exact steps completed in excel to create the data table

d. Create a Scatter plot with “smooth lines” for the Data Table created in c) to show the inventory cost. Label your plot clearly (axis and title). The optimum order quantity should indicate the minimum cost in your plot.

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