OMB 3602 Examination #3 (a) 3. (25 points)- Midwestern Supply orders its fertili
ID: 3315460 • Letter: O
Question
OMB 3602 Examination #3 (a) 3. (25 points)- Midwestern Supply orders its fertilizer from Purina National. The annual demand for this fertilizer 10,000 cubic vds. per year, and each time an order is placed to Purina the cost is $150. The carrying cost is so.75 per cubic yard, and the wholesale cost from Mohawk is $2.00 per cubic yard. Wellington is open 250 days out of the year, and the lead time to receive an order is 10 days. a) Calculae the optimal order quani f b) Calculate the TIC for this fertilizer. c) Calculate the reorder point for this fertilizer. d) Calculate the number of orders per year.Explanation / Answer
The EOQ model is TIC= (w+h)*Q/2+c*D/Q and the optimal quantity is obtained by differentiating the dTIC/dQ=0, thus optimal quantity is Q=SQRT(2c*D/(w+h)).
a) Q=SQRT(2*150*10000/2.75)=1044.46
b)TIC=2.75*1044.46/2+150*10000/1044.46=2872.28
c)Reorder point=L*D/250=10*10000/250=400
d)The number of orders are D/Q=10000/1044.46=9.57 or 10 rounded off.
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