Question
You must make a decision about purchasing an article in your supplier. Demand in your firm for this supply changes in periods (months), but is
You must make a decision about purchasing an article in your supplier. Demand in your firm for this supply changes in periods (months), but is known (Table 3). There are the following cost elements: ordering cost is co = 114,- z, unit price in purchasing is P = 15,- z, period inventory holding cost rate is r = 8% of price. According to the order the supply increases inventory nearly immediately (without a delay at the beginning of the period) and it should allow fulfilling a demand of this period. Initial inventory is 0. Determine plan of period orders in your supplier. First calculate a critical (break-even) point Q* for ordering.
Q* = ... |
Table 3. Demand, inventory levels, orders and total cost
| Period no. | Demand | Initial Inventory | Orders | Final Inventory | Period Total Cost |
|
| 1 | 75 | 0 |
|
|
|
|
| 2 | 45 |
|
|
|
|
|
| 3 | 25 |
|
|
|
|
|
| 4 | 60 |
|
|
|
|
|
| 5 | 120 |
|
| 0 |
|
|
| Total cost |
|
|
Calculations: |
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