Solutions to Chapter 9 Exercises

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Solutions to Chapter 9 Exercises

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Exercise 1

• Expense Cost Type Relevant?
• Postage Order Yes
• Warehouse rent Holding Usually not
• PO forms Order Yes
• Secretarial labor Order Usually not
• Warehouse Holding Usually not
• Guard Holding Usually not
• Interest Holding Yes
• Cost of goods Holding Yes
• Distribution Holding No
• Receiving materials Order Yes
• Ill-will Shortage Yes
• Warehouse heat Holding Usually not
• Advertising Holding No
• Expediting Shortage Yes
• Presidents salary Holding No
• F.G. fire insurance Holding No
• ___________________________
• Part of cost of goods which must be held at
  some interest rate

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Exercise 2
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Exercise 3
3000 feet/month ? 12 36,000 feet/year
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Exercise 4
6
Exercise 5

• Q max level - on hand - on order
• demand during lead time
• 250 - 100 -250 10(15)
• 50 units

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Exercise 6

• a.
• b. (31,623)(12)/1,000,000 0.38 month
• c. 31,623/1,000,000 0.0316 year (every 11.5
  days)
• d. At EOQ annual holding cost annual ordering
  cost
• (1,000,000)(100)/31,623 3162.30.
• But ordering monthly 1,000,000/12
  83,333.33 per month.
• New holding cost 83,333.33(0.2)/2 8333.33
• New ordering cost 100(12) 1200 so the
  holding cost would
• increase 5171 and the ordering cost would
  decrease 1962.30.
• e.
• Same for a doubling of the ordering cost or
  a halving of the
• holding cost.