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1,500 9,000
TC (.6) (20)
2 1,500
TC = 450 + 120 = $570
Therefore the additional cost of staying with the order size of 1,500 is:
$570 – $464.71 = $105.29
b. Only about one half of the storage space would be needed.
6. d = 800 crates/month, so D = 12(800) = 9,600 crates/year
H = .35P = .35($10) = $3.50/crate/yr.
S = $28/order
800 9,600
Present TC : (3.50) (28) $1,736
2 800
2 DS 2(9,600)$28
a. Q0 391.92 [round to 392]
H $3.50
392 9,600
TC at EOQ: (3.50) (28) $1,371.71.
2 392
Savings = $1,736 - $1,371.71 = $364.29 per year.
SUPPLIER A
SUPPLIER B
Buy 500 per order from Supplier A to get the least total cost
26 (a,b).
d= 5 boxes/week
D = 52 weeks/year x 5 boxes/week = 260 boxes/year
S= $2 /order
H= $0.20/box/year
Step1:
ROP = (d x LT) + (z σd √LT)
12 = (5x2) + (z x 0.5 x √2)
z = 2.8285 = 2.84 approximately