Problems

• Jamal, the marketing manager of a supermarket chain, forecasts a demand of 120,000 bottles of mineral water Mabared per month for next year. The purchase cost is Dhs 0.60/liter. The accounting department has estimated the cost of processing an order to be Dhs 25 and the holding cost to be 22% of the purchase cost. What is the optimum order quantity?

• What are the optimum order quantity and total cost for a firm if demand is 300 units per month, holding costs are Dhs 0.25/unit/day and the ordering cost Dhs 8/order?

• Kuwait Fruit Juice Company forecast a yearly demand of 300,000 liters for its cocktail fruit juice. The production is 400,000 liters/year. The production cost is estimated at Dhs 3.75/liter and the holding costs are equal at 20%. The set up cost per run is Dhs 245.
1. What is the optimal quantity to produce Q* per set up?
2. What is the maximum inventory?

• Oran Phones, a newly formed company, will start selling mobile phones. The demand has been estimated at 400 units per year.
 Quantity Price 1-99 180 100-249 170 250 and more 160

Ordering cost is Dhs 140 and annual holding cost is 25% of the unit purchase price per mobile. Which order quantity will minimize the total annual cost?

Assignment Ch 14