The Economic Order Quantity (E0Q) model is a dassical model used for controlling inventary and satisfying demand. Casts included in the model are holding cast per unit, ardering cost and the cast of goods ordered. The assumptions for that madel 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 allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dy = annual demand for itern Gj-unit cost of item Sy = cost per order placed for item i - Inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goads wj -space required for item] The decision variables are Qi, the amount of item ; ta order. The modelis: , . : . cp, 50 . 3,0 , i=1,2..M In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (Dj/Q; is the number of orders), and the last term is the annual inventory holding cost (Qj/2 is the average amount of inventory). Set up a spreadsheet model for the following data: Item 1 Item 2 Item 3 Annual Demand 2,500 2,000 2,000 Item Cost (S) 90 50 70 Order Cost ($) 150 130 125 Space Required 50 25 40 (sq feet) W = 4,000 1 -0.2 Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than a far Salver to find a solution. If required, round your answers to two decimal places Optimal Solution: : Q1 - Q2 = Q3 - - 3 If required, round your answer to the nearest dollar. Do not round intermediate calculations. Total cost - The Economic Order Quantity (E0Q) model is a dassical model used for controlling inventary and satisfying demand. Casts included in the model are holding cast per unit, ardering cost and the cast of goods ordered. The assumptions for that madel are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dy = annual demand for itern Gj-unit cost of item Sy = cost per order placed for item i - Inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goads wj -space required for item] The decision variables are Qi, the amount of item ; ta order. The modelis: , . : . cp, 50 . 3,0 , i=1,2..M In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (Dj/Q; is the number of orders), and the last term is the annual inventory holding cost (Qj/2 is the average amount of inventory). Set up a spreadsheet model for the following data: Item 1 Item 2 Item 3 Annual Demand 2,500 2,000 2,000 Item Cost (S) 90 50 70 Order Cost ($) 150 130 125 Space Required 50 25 40 (sq feet) W = 4,000 1 -0.2 Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than a far Salver to find a solution. If required, round your answers to two decimal places Optimal Solution: : Q1 - Q2 = Q3 - - 3 If required, round your answer to the nearest dollar. Do not round intermediate calculations. Total cost
