EBK OM
EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 11, Problem 9PA

(a)

Summary Introduction

Interpretation:

Economic order quantity (EOQ) and total cost

Concept Introduction:

Economic order quantity refers to the number of unit that an organization added to its inventory in order to minimize inventory cost such as order cost, shortage cost and the holding cost.

(a)

Expert Solution
Check Mark

Explanation of Solution

Given data, Annual demand =1200

Order cost=$40

Unit cost= $5

Carrying charge rate = 18% = .18

The economic order quantity is calculated by the following formula.

  Economic order quantity =  2DSH=  2×1200×40 5×.18=  96,000 .9= 106,666.67= 326.6 = 327

The total order cost is calculated by the following formula.

  Total cost = Purchase cost+Ordering cost+Holding costTC=DC+(DQ)S+(Q2)H

Purchase cost

  = D×C= 1200×5= 6000

Thus, the total cost is

  =DC+(DQ)S+(Q2)H= 6000+( 1200 327)×40+( 3272)×.9=6000+(3.67)×40+(163.5)×.9= 6000+ 146.8+147.15= 6293.95

Thus, the total cost is 6294.95

(b)

Summary Introduction

Interpretation:

Economic order quantity (EOQ) when disposal cost is incorporated into the model.

Concept Introduction:

Economic order quantity refers to the number of the unit that an organization added to its inventory to minimize inventory costs such as order cost, shortage cost, and the holding cost.

(b)

Expert Solution
Check Mark

Explanation of Solution

The economic order quantity is calculated by the following formula.

  Economic order quantity =  2DSH=  2×1200×40 (5×.18)+(.75×.08)=  96,000 .9+0.06= 96,000 0.96= 100000= 316.2 

The total order cost is calculated by the following formula.

  Total cost = Purchase cost+Ordering cost+Holding costTC=DC+(DQ)S+(Q2)H

Purchase cost

  = D×C= 1200×5= 6000

Thus, the total cost is

  =DC+(DQ)S+(Q2)H= 6000+( 1200 316)×40+( 3162)×.96=6000+(3.79)×40+(158)×.96= 6000+ 151.6+164.58= 6316.18

Thus, the total cost is 6294.95

(c)

Summary Introduction

Interpretation:

The outcome of the above calculation on the sustainability practice.

Concept Introduction:

Economic order quantity refers to the number of the unit that an organization added to its inventory to minimize inventory costs such as order cost, shortage cost, and the holding cost.

(c)

Expert Solution
Check Mark

Explanation of Solution

From the part (a) and (b) it can be concluded that the total cost is a little higher. Thus, by adjusting the economic order quantity, an organization can save the additional cost while protecting the environment.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Refer to Table S6.1 - Factors for Computing Control Chart Limits (3 sigma) for this problem. Sampling 4 pieces of precision-cut wire (to be used in computer assembly) every hour for the past 24 hours has produced the following results: Hour R Hour X R Hour X R Hour X R 1 3.25" 0.71" 7 3.15" 0.58" 13 3.11" 0.85" 19 4.51" 1.56" 2 3.20 1.18 8 2.65 1.08 14 2.83 1.31 20 2.79 1.14 3 3.12 1.38 9 15 4. 3.39 1.31 10 5 2.97 1.17 6 2.76 0.32 3.02 0.71 3.12 1.01 2.75 1.33 16 2.74 0.50 22 11 2.73 1.17 17 2.76 1.43 23 12 2.87 0.45 18 2.64 1.24 21 2.75 1.03 3.18 0.46 2.94 1.53 24 2.54 0.97 Based on the sampling done, the control limits for 3-sigma x chart are (round all intermediate calculations to three decimal places before proceeding with further calculations): Upper Control Limit (UCL) = inches (round your response to three decimal places). Lower Control Limit (LCL) = inches (round your response to three decimal places). Based on the x-chart, the wire cutting process has been The control limits…
Choose a specific cars company. E.g Toyota, Volkswagen, Hyundai, Mercedes-Benz, BMW, Honda, Ford, Audi, Tesla Define a list of required machinery, equipment, workstations, offices, rest areas, materials, etc. Develop and define the location of machinery, equipment, workstations, offices, rest areas, materials. Make the distribution in the manufacturing facility the most efficient way possible. Develop a process distribution for one specific product. Explain why you consider this is the most efficient distribution for this specific manufacturing facility. demonstrate the benefits of optimizing a production line with the best distribution of its equipment and spaces. To be more productive and profitable.
Provide a Synposis of the Article
Knowledge Booster
Background pattern image
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
  • Text book image
    Purchasing and Supply Chain Management
    Operations Management
    ISBN:9781285869681
    Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
    Publisher:Cengage Learning
    Text book image
    Practical Management Science
    Operations Management
    ISBN:9781337406659
    Author:WINSTON, Wayne L.
    Publisher:Cengage,
    Text book image
    Marketing
    Marketing
    ISBN:9780357033791
    Author:Pride, William M
    Publisher:South Western Educational Publishing
  • Text book image
    MARKETING 2018
    Marketing
    ISBN:9780357033753
    Author:Pride
    Publisher:CENGAGE L
Text book image
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Text book image
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
Text book image
MARKETING 2018
Marketing
ISBN:9780357033753
Author:Pride
Publisher:CENGAGE L
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY