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    Sample Solution: Linear optimization: Inventory Management

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    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Sales per year 10,400 cd's

    Mfg/Purchasing Costs
    She buys from supplier >= 1000 at $4.45 ea CD
    She buys from supplier <=1000 at $4.50 ea CD
    Delivery Charge from her supplier is $10/shipment regardless of size

    She pays Finance Rate annual interest rate 15%
    She pays NYS Property Tax 5% on Annual Inv Value
    She pays Insurance Charges 0.02 for every dollar of inventory

    She Buys from her supplier 200 CD's/Week

    How much does inv management cost her?
    Best small order inventory plan?
    how big are her orders?
    how much does it cost her?
    How much does she save?

    © BrainMass Inc. brainmass.com December 24, 2021, 11:40 pm ad1c9bdddf
    https://brainmass.com/math/optimization/sample-solution-linear-optimization-inventory-management-590717

    SOLUTION This solution is FREE courtesy of BrainMass!

    Sales per year 10,400
    Quantity Price per unit
    Less than 1,000 $4.45
    More than 1,000 $4.50

    Delivery charge per shipment $10
    Finance rate 15%
    Property tax 5% of invetory value
    Insurance charges 0.02 for every dollar of inventory
    Order size 200

    Number of orders per year = (Sales per year/Order size) 52
    Average inventory 200

    Delivery charge per year = Number of orders per year*Delviery charge per shipment $520.00
    Finance cost = Average inventory*Price per unit*Finance rate $133.50
    Property tax = Average inventory*Price per unit*Property tax $44.50
    Insurance charges = Average inventory*Price per unit*Insurance charges $17.80
    Total cost $715.80

    Order size 326.00

    Number of orders per year = (Sales per year/Order size) 31.90184049
    Average inventory 326

    Delivery charge per year = Number of orders per year*Delviery charge per shipment $319.02
    Finance cost = Average inventory*Price per unit*Finance rate $217.61
    Property tax = Average inventory*Price per unit*Property tax $72.54
    Insurance charges = Average inventory*Price per unit*Insurance charges $29.01
    Total cost $638.17

    Savings $77.63
    She has to order 326 units every time

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 11:40 pm ad1c9bdddf>
    https://brainmass.com/math/optimization/sample-solution-linear-optimization-inventory-management-590717

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