Management and Organizational Studies 3330A/B Lecture Notes - Lecture 2: Denim, Carrying Cost, Safety Stock

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3330A/B
• Professor: Rick Burjaw

Document Summary

Example 1: western jeans company (wjc) purchases denim from huron textile mills. Wjc uses 36,000 yards of denim per year. The cost of ordering denim from huron is. Tc= (ordering cost) (no. of orders) + (holding cost) (average inventory) =: calculate the optimal order quantity and the total annual inventory cost. Example 2: in example 1 scenario, the textile company has offered the western jeans. The price without discount is . 50 per yard. Step 1: eoq = (2dco / ch) = (2*36000*500/0. 4)1/2 =9487. Step 2: eoq is not optimal since it does not qualify for the lowest purchase price. Tc (2%) = co (d/q) + ch (q/2) + p d. Tc (5%) = *(36000/10000) + sh. 4*(10000/2) + . 38*36000= . Tc (10%) = *(36000/15000) +$ 0. 4*(15000/2) + . 25*36000 = . Example 3: super rug store produces its own carpet. The cost of setting up the production process to make the carpet is .