Ceramics Direct produces tiles for luxury flooring. The demand per month is 700 pounds of tile. Ceramics Direct can produce 1500 pounds of tile per month. Since the machinery gets dirty and must be cleaned before every batch the setup cost if $300. It cost $10 to produce one pound of tile. The inventory cost is 30% of annual cost. There can be a chance of backlogging. The two types are loss of goodwill, which is about $20 per pound. Shortage penalty is $1.50 per pound short every month. Find the economic order quantity, optimal backorder, and annual total cost of inventory.

Ceramics Direct produces tiles for luxury flooring. The demand per month is 700 pounds of tile. Ceramics Direct can produce 1500 pounds of tile per month. Since the machinery gets dirty and must be cleaned before every batch the setup cost if $300. It cost $10 to produce one pound of tile. The inventory cost is 30% of annual cost. There can be a chance of backlogging. The two types are loss of goodwill, which is about $20 per pound. Shortage penalty is $1.50 per pound short every month. Find the economic order quantity, optimal backorder, and annual total cost of inventory.

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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