MGT613 GDB Solution

Due date Monday, January 24, 2011

ABC Company deals in manufacturing Air Conditioners. For manufacturing purpose the company uses 824 compressors annually. Ordering costs are $14, carrying costs are $6 per compressor a year. According to price schedule orders less than 50 compressors will cost $15 per compressor, 50 to 79 compressors will cost $13 per compressor, 80 to 99 compressors will cost $11 per compressor and lager orders will cost $10 per compressor.

Determine the optimal order quantity and describe in which price range it will fall. Based on that price range also determine the total cost.

Solution

Given data

D=demand =824 annually
S=ordering cost =14 per compressor
H=carrying cost =6 per compressor


Range Price
1 – to - 49 RS 15
50 - to - 79 RS 13
80 - to - 99 RS 11
100 or more Rs 10

EOQ= under root (2DS/H)

EOQ=under root 23072 / 6

EOQ= under root 3845

EOQ= 62

TOTAL COST

TC= carrying cost + order cost +purchase cost

TC= 11084.06