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BUS 3020

September 30, 2015


Assignment 11
11-08.

EOQ = [(2DS)/H]^(1/2)
EOQ = [(2*1,000*25)/100]^(1/2)
EOQ = 22.36 units should be ordered

36a.

EOQ = [(2*D*Co)/Cc]^(1/2)
EOQ = [(2*54,000*100)/0.54]^(1/2)
EOQ = 4472.13 is the optimal order quantity of cotton

b.

Number of Orders = D/Q


Number of Orders = 54,000/4472
Number of Orders = 12.07

SYM should place cotton orders once a month.


c. Since it takes two weeks for the cotton to reach SYM, SYM should order in
the middle of each month so before March 16 th.
d. SYM will place 12 orders in the next year.
e.

Holding Cost = (Q/2)*Cc


Holding Cost = (4,472/2)*0.54
Holding Cost = 1,207.44

The annual holding cost of raw materials is $1,207.44


f.

Ordering Cost = (D/Q)*Co


Ordering Cost = (54,000/4472)*100
Ordering Cost = $1,207.51

The annual ordering cost is $1,207.51


g. This would cause the size of the optimal batch to increase therefore
causing the inventory size to increase as well. However, the annual setup
cost and annual holding cost for SYM would decrease.