Fliboardis a startup company that develops self-balancing scooters (hoverboards) and sells online

52weeks a year

Fliboard currently sells two products, Proboard(P1) and Babyboard(P2)

Weekly demand (independent)

Proboard (P1) : 30units per week with standard deviation of 15units per week

Babyboard (P2): 20units per week with standard deviation of 10units per week

Price

Proboard : $400

Babyboard: $300

Costs of battery

Proboard: $150Samsung 42V Li-ion battery (B1)

Babyboard: $100HoverFixer36V Li-ion battery (B2)

Cost of material other than battery

Proboard : $150

Babyboard: $100

Fliboard uses continuous review policy

Lot size is calculated using economic order quantity (EOQ)

Now Fliboard decides to use Samsung battery for both hoverboards so that demands of batteries can be aggregated

Target CSL

Samsung battery: 0.99

Replenishment lead time

Samsung battery: 4 weeks

Fixed order cost

Samsung battery: $1,000 per order

Inventory holding cost of battery

Calculate following values for replenishing battery

questions

(3-1) Lot size (Q)

For Samsung battery

(3-2) Safety inventory (ss)

For Samsung battery

(3-3) Annual ordering cost (AOC)

For Samsung battery

(3-4) Annual holding cost (AHC)

For Samsung battery

(3-5) Annual material cost including battery (AMC)

For Proboard

For Babyboard(cost increases due to using Samsung battery)

Samsung battery: $60

Calculate total profit of the current operation (two hoverboards)

Assume annual ordering cost and holding cost of all components except batteries are negligible

Thus, we only need to consider costs AOC, AHC, and AMC in (3-3), (3-4) and (3-5) for calculating profit

(3-6) Total profit Profit = Revenue Total Cost Where total cost is sum of:Annual material cost Annual ordering costAnnual holding cost