Optimal order quantity per order 2) Minimum total annual inventory costs 3) The number of orders per year 4) The time between orders (in working days) (b) Consider four cases of variation in the model parameters as follows: (a) Both ordering cost and carrying cost are 10% less than originally estimated; (b) both ordering cost and carrying cost are 10% higher than originally estimated; (c) ordering cost is 10% higher and carrying cost is 10% lower than originally estimated; and (d) ordering cost is 10% lower and carrying cost is 10% higher than originally estimated. Determine the optimal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four cases and compare the sensitivity of the model solution to changes in parameter values.

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) AV City stocks and sells a particular brand of laptop. It costs the firm $625 each time it places an order with the manufacturer for the laptops. The cost of carrying one laptop in inventory for a year is $130. The store manager estimates that total annual demand for the laptops will be 1500 units, with a constant demand rate throughout the year. Orders are received within minutes after placement from a local warehouse maintained by the manufacturer. The store policy is never to have stock-outs of the laptops. The store is open for business every day of the year except Christmas Day. Determine the following:

1) Optimal order quantity per order
2) Minimum total annual inventory costs
3) The number of orders per year
4) The time between orders (in working days)

(b) Consider four cases of variation in the model parameters as follows: (a) Both ordering cost and carrying cost are 10% less than originally estimated; (b) both ordering cost and carrying cost are 10% higher than originally estimated; (c) ordering cost is 10% higher and carrying cost is 10% lower than originally estimated; and (d) ordering cost is 10% lower and carrying cost is 10% higher than originally estimated. Determine the optimal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four cases and compare the sensitivity of the model solution to changes in parameter values.

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