Production and Operations Analysis, Seventh Edition
7th Edition
ISBN: 9781478623069
Author: Steven Nahmias, Tava Lennon Olsen
Publisher: Waveland Press, Inc.
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Question
Chapter 4.8, Problem 28P
Summary Introduction
To determine:
Optimal order quantity
Introduction:
Economic order quantity is the optimal quantity which is ordered keeping in mind to minimize the cost and fulfilling of demand. This is usually done when cost varies according to the number of units demanded.
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Suppose that in the given problem the space consumed by each vegetable is not proportional to its cost. In particular, suppose that one pound of lettuce required 0.4 square foot of space and one pound of zucchini required 1 square foot of space. Determine upper and lower bounds on the optimal values of the order quantities in this case. Test different values of the Lagrange multiplier to find the optimal values of the order quantities. (A spreadsheet is ideally suited for this kind of calculation. If you solve the problem using a spreadsheet, place the Lagrange multiplier in a cell so that its value can be changed easily.)
Instructions
There are four parts to this problem. Use Excel to perform the following.
a. Use the economic order quantity formula (EOQ = SQRT((2SD/H)) to determine the optimal number of units that the company should order based on each assumed level of order based on each assumed level of order quantities provided in the data.
b. Complete the table by calculating the number of orders per year, annual order cost, annual holding cost, and annual total cost. Highlight the minimum annual total cost using conditional formatting. Hint: The minimum cost should equal the cost at the EOQ you calculated in part a.
c. Create a line chart that graphs annual order cost, annual holding cost, and annual total cost. The x-axis should be the quantity ordered. Include a chart legend, appropriate chart title, axes labels, and properly formatted amounts on the axes.
d. Examine the chart and your responses to parts a and b. Indicate any relationships.
Usha Handling Company is currently faced with an inventory rotation problem. Thisdifficulty stems from the fact that some supplies must be used prior to a stated expiration date.Upon receipt, a new shipment of these perishable items must be stacked beneath the boxes that are currently in inventory. A substantial amount of time is consumed in restacking the items according to their expiration dates. The company would like to reduce the double and sometimes triple handling of items. How can this goal be achieved? Are there alternative solutions which might also be effective?
Chapter 4 Solutions
Production and Operations Analysis, Seventh Edition
Ch. 4.4 - Prob. 1PCh. 4.4 - Prob. 2PCh. 4.4 - Prob. 3PCh. 4.4 - Prob. 4PCh. 4.4 - Prob. 5PCh. 4.4 - Prob. 6PCh. 4.4 - Prob. 7PCh. 4.4 - Prob. 8PCh. 4.4 - Prob. 9PCh. 4.5 - Prob. 10P
Ch. 4.5 - Prob. 11PCh. 4.5 - Prob. 12PCh. 4.5 - Prob. 13PCh. 4.5 - Prob. 14PCh. 4.5 - Prob. 15PCh. 4.5 - Prob. 16PCh. 4.6 - Prob. 17PCh. 4.6 - Prob. 18PCh. 4.6 - Prob. 19PCh. 4.6 - Prob. 20PCh. 4.7 - Prob. 21PCh. 4.7 - Prob. 22PCh. 4.7 - Prob. 23PCh. 4.7 - Prob. 24PCh. 4.7 - Prob. 25PCh. 4.8 - Prob. 26PCh. 4.8 - Prob. 27PCh. 4.8 - Prob. 28PCh. 4.9 - Prob. 29PCh. 4.9 - Prob. 30PCh. 4 - Prob. 31APCh. 4 - Prob. 32APCh. 4 - Prob. 33APCh. 4 - Prob. 34APCh. 4 - Prob. 35APCh. 4 - Prob. 36APCh. 4 - Prob. 37APCh. 4 - Prob. 38APCh. 4 - Prob. 39APCh. 4 - Prob. 40APCh. 4 - Prob. 41APCh. 4 - Prob. 42APCh. 4 - Prob. 43APCh. 4 - Prob. 44APCh. 4 - Prob. 45AP
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