Costs

Costs

1) If the annual demand is 11,000 units, the set up cost is $700, and the Holding cost is $9 / unit / year, what will be the best order size given the
follwoing quantity discounts?

Quantity Discount Pricing
From	To	Price
700	1499	$ 45.00
1500	2499	$ 44.00
2500	5999	$ 43.50
6000	up	$ 43.25

2) Pioneer Electronics is thinking about making their own video cards which have an demand of 21,284 units. The cards can be produced at a rate of 107 units

Costs

per day. Pioneer operates 29 days in a year. Assume that demand is uniform throughout the year. Setup cost is $1,006 for a run, and holding cost is $14 per
card / year.

What is the daily usage?

3) The lead time demand has a mean of 85 units with a standard deviation of 12. It follows normal distribution. If you want a service level
of 95%, what should be the Reorder Point (ROP)?

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