Math Is Fun Forum

Prakash Panneer

Member

Registered: 2006-06-01

Posts: 110

Help meeeeeeeeeeee..........

This is one of the operation research problem. PLEASE HELP ME.....................

A large computer store purchases a component used in the assembly of desk top computers directly from a supplier. The price of each component is RM8.00. The supplier will deliver order of any size for a charge of RM4.00. The cost of holding an item in inventory for a year is estimated to be 20% of the cost price. The store manager estimates that 500 components are required monthly. The store is open for 300 days a year. It takes approximately 10 days for an order to arrive once the order has been placed. Currently, the computer store has a policy of ordering 250 units, two times in a month.

   1. Calculate the total annual inventory cost based on the current ordering policy

   2. Compute the optimum order quantity and calculate the associated minimum total annual inventory cost.

   3. Based on the optimum order quantity, should the store change its ordering policy?

   4. Based on the optimum order quantity, determine the reorder point.

   5. If the supplier offers large order discounts of 8% and 10% for single order quantities of above 400 and 500, respectively, should the company change its ordering policy?

Advance Thanks.........:)

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Letter, number, arts and science
of living kinds, both are the eyes.

George,Y

Member

Registered: 2006-03-12

Posts: 1,379

Re: Help meeeeeeeeeeee..........

should the diliver cost be splitted into every item's initial cost?

I guess yes, since it is closely related to the acquisition of the item.

On time measurement I use month as an elementry unit. 300 days is meaningless.

suppose the inventories are sold smoothly everyday. An average item has a quater of month in storage. (a quater is the medium between 0 and 1/2)

Pure price cost monthly:
(500)(8)=4000

delivery cost monthly:
(500/250)(4)=8

inventory aquisition cost yearly:
(12)(4000+8)=32,096

storage lost:
(20%)[(1/4)/12](32,096)=

Add up the above two you'll get the total inventory cost per year.

Suppose every order amount is x

Get the answer for question 1 and the function of total inventory cost by x, then we can go on to question 2 and others.

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X'(y-Xβ)=0

Prakash Panneer

Member

Registered: 2006-06-01

Posts: 110

Re: Help meeeeeeeeeeee..........

Thanks a lot.....................

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Letter, number, arts and science
of living kinds, both are the eyes.

Gayathiri

Guest

Re: Help meeeeeeeeeeee..........

For the same question, im looking for a solution as well.... do help me.. I try my self the solution but need to know whether it is right.... and question 3,4 and 5 i really do not know how to do..