Question

i need this answer because the answer is different than what i do , i attached my work please chick it as well if its right or wrong

SECTION B- 40 MARKS Please solve given problems. Marks for each question is given in the bracket Q1 (6 Points): Etisalat purchases switches at AED 1400 per switch. The holding Price per unit, the ordering cost is AED 500 per order, and demand is steady, at 400 per The company's supplier, decides to offer price concessions in order to attract larger orders. T price structure is shown below. cost is 10% of he PRICE RANGE PRICE PER UNIT P QUANTITY ORDERED Initial price 1 to 99 AED1,400 Discount price 1 100 to 199 AED1,300 Discount price 2 AED1,200 200 or more units (a). What is the optimal order quantity (3 Points) (b). What is the optimal annual total cost? (3 Points)

which one better 200 or 192.15 ? it depend on what

Answer 1

We have the following values:

DEMAND = 4800

HOLDING COST = 10%

ORDERING COST = 500

Now in order to find the optimal order quantity we need to adjust the EOQ value to fit the order quantity upon which the discounts are based:

If the EOQ value lies between the minimum and maximum quantity for a particular price, the value of the EOQ is used. If the EOQ is smaller than the quantity, the minimum quantity is used and if the value of the EOQ is higher than the quantity, the maximum quantity value for a particular price is used. Now. based on the above assumptions, we can calculate individual values for EOQ since the holding cost is variable and adjust them according to the quantity which represents the adjusted Q value

EOQ = SQRT(2DS/H)

TOTAL COST OF INVENTORY = DEMAND * PRICE PER UNIT + ((ADJUSTED Q / 2) * HOLDING COST) + ((DEMAND / ADJUSTED Q) * ORDERING COST

The optimal order quantity is based on the lowest total inventory cost for a particular unit price and quantity, the quantity then becomes the optimal order quantity and the corresponding TCI value becomes the inventory buying, ordering and holding cost.

The answer is as follows:

OPTIMAL ORDER QUANTITY = 200

TOTAL COST OF INVENTORY = 5784000

NO.	FROM QUAN	TO QUAN	PRICE	HOLDING	EOQ	ADJUSTED Q	TOTAL COST OF INVENTORY
1	1	99	1400	140	185	99	6751172.424
2	100	199	1300	130	192	192	6264980
3	200	MORE	1200	120	200	200	5784000

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