Question

In: Statistics and Probability

Apply the EOQ model to the following quantity discount situation in which D = 450 units...

Apply the EOQ model to the following quantity discount situation in which D = 450 units per year, Co = $42, and the annual holding cost rate is 20%.

Discount
Category

Order Size
Discount
(%)

Unit Cost
1   0 to 99 0 $12.00  
2   100 or more 3 $11.64  

What order quantity do you recommend? If required, round your answer to the nearest whole number.

Solutions

Expert Solution

SOLUTION:

From given data,

D = 450 units per year,

Co = $42, and

The annual holding cost rate = H = 20%

The annual holding cost rate = H = 20%

20/100 * 12 =2.4

20/100 * 11.64 =2.328

Formula for

=

At order size 0 to 99

=

= 125.499 units

This is not feasible as it is not in quantity range ' 0-99 ' units.

At order size 100 or more

=

= 127.4249 units

This is feasible as it is not in quantity range ' 100 or more ' units.

So, the optional order quantity is 127.429 that is near whole number is 127 units.


Related Solutions

Apply the EOQ model to the following quantity discount situation in which D = 400 units...
Apply the EOQ model to the following quantity discount situation in which D = 400 units per year, Co = $36, and the annual holding cost rate is 25%. Discount Category Order Size Discount (%) Unit Cost 1   0 to 99 0 $10.00   2   100 or more 4 $9.60   What order quantity do you recommend? If required, round your answer to the nearest whole number. ***answer is not 4
Which of the following is NOT an assumption of the traditional economic order quantity (EOQ) model?...
Which of the following is NOT an assumption of the traditional economic order quantity (EOQ) model? a. Holding and ordering costs are stable and known. b. Demand is constant and known. c. Supply lead time is constant and known. d. Quantity discounts are possible. Kim’s Nail Salon uses a weighted moving average method to forecast demand. She assigns a weight of 5 to the previous month’s demand, 3 to demand two months ago, and 2 to demand three months ago....
Which of the following is true of the EOQ model? Note that the optimal order quantity,...
Which of the following is true of the EOQ model? Note that the optimal order quantity, Q*, will be called EOQ. If the annual sales, in units, increases by 10%, then EOQ will increase by 10%. If the average inventory increases by 10%, then the total carrying costs will increase by 10%. If the average inventory increases by 10% the total ordering costs will increase by 10%. At any order quantity below the EOQ, then total carrying costs increase, but...
what is the formula of minimum total cost in the EOQ model with quantity discount .I...
what is the formula of minimum total cost in the EOQ model with quantity discount .I want examples and definitions of this
Using the EOQ​ model, if a​ firm's order quantity is 500 units and its annual holding...
Using the EOQ​ model, if a​ firm's order quantity is 500 units and its annual holding cost is greater than its annual setup​ cost, then what can we say about the optimal order​ quantity? A. Optimal order quantity​ = 500 units B. Optimal order quantity​ < 500 units C. Optimal order quantity​ > 500 units D. Not enough information is given to answer the question
1. Consider the basic EOQ model (no uncertainty). Optimal order quantity (Q ∗) is 1,800 units....
1. Consider the basic EOQ model (no uncertainty). Optimal order quantity (Q ∗) is 1,800 units. What is the average inventory level (I ∗)? a. 900 units b. 1,800 units c. 600 units d. 1,000 units e. 3,600 units 2. Consider the basic EOQ model (no uncertainty). Annual holding cost (AHC) is $2,400. Find annual ordering cost (AOC). a. Cannot be answered because there is missing information b. AOC=$0, since there is no uncertainty c. $1,200, since AOC=AHC/2 at economic...
Distinguish between basic Economic Order Quantity (EOQ) and Quantity Discount Models. Your answer should be supported...
Distinguish between basic Economic Order Quantity (EOQ) and Quantity Discount Models. Your answer should be supported with relevant examples and calculations
The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying...
The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and...
the primary purpose of the Economic Order Quantity (EOQ) model is to: A. Maximize the customer...
the primary purpose of the Economic Order Quantity (EOQ) model is to: A. Maximize the customer service level B. Calculate the reorder point, so that replenishment take place at the proper time C. Calculate the optimum safety stock level D. None of these answers
The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units
The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, the setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. The production order quantity for this problem is approximate.  
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT