Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost

image text in transcribed

The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model 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 Dj = annual demand for itemj Cj = unit cost of itemj Sj = cost per order placed for itemj i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj space required for item The decision variables are Qj, the amount of item ; to order. The model is: Minimize - 2*[0,0,+Sp++ic, ] st Mwe, sw 0,20 j=1.2.... In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (Dj/Qj 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 2,000 Item 2 2,000 Item 3 1,000 100 50 Annual Demand Item Cost ($) Order Cost ($) Space Required (sq. feet) 80 125 150 135 50 25 40 W = $20,000 i = 0.2 Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than O for Solver to find a solution. If required, round your answers to two decimal places. Optimal Solution: Q1 - X Q2 - X Q3 - If required, round your answer to the nearest dollar. Do not round intermediate calculations. Total cost = $ The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model 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 Dj = annual demand for itemj Cj = unit cost of itemj Sj = cost per order placed for itemj i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj space required for item The decision variables are Qj, the amount of item ; to order. The model is: Minimize - 2*[0,0,+Sp++ic, ] st Mwe, sw 0,20 j=1.2.... In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (Dj/Qj 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 2,000 Item 2 2,000 Item 3 1,000 100 50 Annual Demand Item Cost ($) Order Cost ($) Space Required (sq. feet) 80 125 150 135 50 25 40 W = $20,000 i = 0.2 Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than O for Solver to find a solution. If required, round your answers to two decimal places. Optimal Solution: Q1 - X Q2 - X Q3 - If required, round your answer to the nearest dollar. Do not round intermediate calculations. Total cost = $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To solve this Economic Order Quantity EOQ problem with space constraints using Excel Solver follow t... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Students also viewed these Accounting questions

Question

Write a program to check an input year is leap or not.

Answered: 1 week ago

Question

Write short notes on departmentation.

Answered: 1 week ago

Question

What are the factors affecting organisation structure?

Answered: 1 week ago

Question

What are the features of Management?

Answered: 1 week ago

Question

Briefly explain the advantages of 'Management by Objectives'

Answered: 1 week ago