Page 285 - DCOM303_DMGT504_OPERATION_RESEARCH

Operations Research

Notes 16. A manufacturing company uses certain part at a constant rate of 4,000 units per year. Each
unit costs ` 2 and the company personnel estimate that it costs ` 50 to place an order, and
that the carrying cost of inventory is 20% per year, find the optimum size of each order and
the minimum yearly cost.
17. An electrical appliance manufacturer wishes to know what the economic quantity should
be for a plastic impeller when following information is available:
The average daily requirement is 120 units and the company has 250 working days a year,
so that the total yearly requirement is approximately 30,000 units a year. The manufacturing
cost is 50 paise per part. The sum of annual rate is, interest, insurance, taxes and so forth,
20% of the unit cost and the cost of preparation is ` 50 per lot.
18. Find the optimum order quantity for a product for which the price breaks are as follows:

Quantity Unit Cost (`)
O < Q1 < 500 10.00
500 < Q2 9.25

The monthly demand for the product is 200 units, the cost of storage is 2% of the unit cost
and the cost of ordering is ` 100.

19. Find the optimum order quantity for the following. Annual demand = 3,600 units, ordering
cost = ` 50, cost of storage = 20% of the unit cost.
Price break:

Quantity Unit Cost (`)
O < Q1 < 100 20.00
100 < Q2 18.00

20. The annual demand of a product is 10,000 units. Each unit costs ` 100 if orders placed in
quantities below 200 units but for orders of 200 or above the price are ` 95. The annual
inventory holding cost is 10% of the value of the items and the ordering cost is ` 5 per
order. Find the economic is size.
21. A soft drink manufacturing company buys a large number of crates every year which it
uses in the warehousing of its bottled products. A local vendor has offered the following
average discount schedule for crates:

Quantity Unit Cost (`)
Up-to 699 10
700 & above 9.25

There average yearly replacement is 2,400 crates. The carrying cost is 12% of the average
inventory and ordering cost per order is ` 100.

22. Find the optimal order quantity for a product for which the price breaks are as follows:
Quantity Unit Cost (`)
0 < Q1 < 50 10
50 < Q2 < 1000 9
100 < Q3 8

The monthly demand for the product is 200 units. The cost of storage is 25% of the unit cost
and ordering cost is ` 20.00 per order.

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