Problem 3# To set up for a particular part costs $180 per run. The part value is
ID: 374817 • Letter: P
Question
Problem 3# To set up for a particular part costs $180 per run. The part value is $25 each. Fifty thousand units per year are required. The holding costs are 25% of part value. a. Solve using any method for the EOQ and the order frequency. b. Set up a table and graph solution from part a. c. Show what would happen if the setup costs go to $300 per run. d. What if the usage increases to 75,000 per year? Decreases to 25,000 per year? f. What would occur if the unit costs remain at $25 per unit but the setup costs decrease to $45 per order? Note: I need help for (f).
Explanation / Answer
Answer (a)
Setup Cost (S)=$180
Annual Demand (D) =50000
Holding Cost (H) =25% of Part Value($25) =$6.5
So EOQ = (2DS/H)1/2
= (2*50000*180/6.5)1/2
= 1664.10
Thus EOQ = 1665
Order Frequency = Total Annual Order / EOQ = 50000/1665 = Apprximately 30 days
Answer (b)
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