4) (20pts) Dry Concrete Inc. (DCI) is a company that produces and sells a special additive for concrete that makes it waterproof. The additive is a powder that is sold in bags of 25lbs. The cost of producing one bag is US$30 and the setup cost of starting production is estimated to be US$ 120 per production run. The holding cost affecting this product is estimated to be 20% of the production cost. DCI serves the demand of five different construction company. Each construction company requires a slightly different formulation, that will not affect the cost structure, but it will require that all the product bags produced on each production batch can be sold to only one specific customer. DCI holds all the bags produced on a production run until the production run finishes and all the order is entirely sent to the customer. (No shipment occurs before the production run is done). The demand of each customer and their estimated cost structure is shown below. 1_1 _2 1_3 _4 1_5 Demand (Bags) 198.00 198.00 202.00 204.00 198.00 60.00 60.00 60.00 60.00 60.00 c (US$/Bag) k (US$/order) ic (% of c) 5.00 8.00 5.00 4.00 4.00 0.20 0.25 0.15 0.20 0.23 a) Compute the EMQ for the firm, Optimal Cost of this quantity and number of production runs that they must do through a year. (4 pts) b) Compute the EOQ and optimal cost when ordering the EOQ for each customer. (4 pts) c) What will be the cost for the supplier if they decide to produce: a. Min EOQ from part b) (2 pts) b. Max EOQ from part b) (2 pts) d) If DCI offers an all-units discount of US$5 per unit for each order greater than 200 units. Will this incentive all construction companies to buy 200 units? (4 pts) e) Will all customers be willing to take the discount if the bracket quantity is 100 units? (4 pts) 4) (20pts) Dry Concrete Inc. (DCI) is a company that produces and sells a special additive for concrete that makes it waterproof. The additive is a powder that is sold in bags of 25lbs. The cost of producing one bag is US$30 and the setup cost of starting production is estimated to be US$ 120 per production run. The holding cost affecting this product is estimated to be 20% of the production cost. DCI serves the demand of five different construction company. Each construction company requires a slightly different formulation, that will not affect the cost structure, but it will require that all the product bags produced on each production batch can be sold to only one specific customer. DCI holds all the bags produced on a production run until the production run finishes and all the order is entirely sent to the customer. (No shipment occurs before the production run is done). The demand of each customer and their estimated cost structure is shown below. 1_1 _2 1_3 _4 1_5 Demand (Bags) 198.00 198.00 202.00 204.00 198.00 60.00 60.00 60.00 60.00 60.00 c (US$/Bag) k (US$/order) ic (% of c) 5.00 8.00 5.00 4.00 4.00 0.20 0.25 0.15 0.20 0.23 a) Compute the EMQ for the firm, Optimal Cost of this quantity and number of production runs that they must do through a year. (4 pts) b) Compute the EOQ and optimal cost when ordering the EOQ for each customer. (4 pts) c) What will be the cost for the supplier if they decide to produce: a. Min EOQ from part b) (2 pts) b. Max EOQ from part b) (2 pts) d) If DCI offers an all-units discount of US$5 per unit for each order greater than 200 units. Will this incentive all construction companies to buy 200 units? (4 pts) e) Will all customers be willing to take the discount if the bracket quantity is 100 units? (4 pts)
