The procurement department of Ponce Electronics purchases three items from a par
ID: 457425 • Letter: T
Question
The procurement department of Ponce Electronics purchases three items from a particular supplier. The fixed cost of placing an order for any of three items is $50. The inventory holding cost factor is 20% of the unit cost. Other relevant data are presented in the following table. The CFO has placed a $75,000 limit on the average value of inventory carried in stock. Furthermore, there is a limit on the amount of space available to store inventory of 10,000 ft^2. Find the order quantity that minimized the total annual cost, subject to the constraints.Explanation / Answer
Ans:
The CFO has put a $75000 limit on the normal estimation of stock conveyed in stock. Besides , there is a point of confinement on the measure of space accessible to store stock of 10000 ft2 . the request amount that minimized the aggregate yearly cost , subject to the imperatives
Stock point of confinement = $75,000
Complete Annual interest = (340*4) + (125*3) + (210*1)
= 1,360 + 375 + 210 = $ 1,945
Yearly space required = (10*350) + (15*125) + (12*210)
= 3,500 +1,875 +2,520
= $7,895
Request Quantities, Q = (2 * D * S/H)
D = Annual Usage = (350 + 125 +210) = 685
S = Ordering Costs = $100
H = Carrying cost * Unit cost = 20% * (4 + 3 + 1) = 0.2 * 8 = $1.6
Q = (2*685*100/1.6)
= 85,625
= 292.62 Units
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