question archive The maintenance department of a large hospital uses about 1800 cases of liquid cleanser annually
The maintenance department of a large hospital uses about 1800 cases of liquid cleanser annually
Subject:Operations ManagementPrice:4.86 Bought11
The maintenance department of a large hospital uses about 1800 cases of liquid cleanser annually. Ordering cost is $50, carrying cost is 0.15 percent of the prices of case, and the new price schedule indicates that orders of less than 100 cases will cost $30 per case, 101 to 200 cases will cost $25 per case, 201 to 350 cases will cost $20 per case, and larger orders will cost $15 per case.
i. Determine the optimal order quantity for each of the ranges
ii. Determine the optimal total cost per year for each of the ranges.
iii. Determine the minimal total cost solution to the problem.
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Answer :
( i ) EOQ for each price break
- EOQ 1 - 100 = 200 unit ----Not feasible
- EOQ 101 - 200 = 219.11 unit ------ Not feasible
- EOQ 201 - 350 = 244.94 unit ----- Feasible
- EOQ 351 - above = 282.84 unit ------ Not feasible
( ii ) Optimal total cost per year of each range
- Optimal total cost for 1 - 100 = 55125 $
- Optimal total cost for range 101 - 200 = 45825 $
- Optimal total cost for range 201 - 350 = 36734.86 $
- Optimal total cost for range 351 - above = 27651.28 $
( iii ) Minimum total cost solution of the problem is at
- Order quantity q = 351 cases
- Minimum total cost = 27651.28 $
Please see the attached file for the complete solution
