Question

The seasonal demand for a particular product is given below: Period 1 2 3 4 5 6 Demand 300 450 100 450 450 100 The fixed parameters are: Fixed Cost $8 Unit Production Cost $1 Holding Cost $ 1.3 Calculate total ordering cost using following three methods: i) Lot-for-Lot ii) Wagner-Whitin algorithm iii) Fixed order quantity​

Answer 1

The ordering cost using the Lot-for-Lot method is 900.06.

How to calculate the cost?

The ordering cost using the Lot-for-Lot method will be calculated thus:

C = Q/2(H) + D)Q(S)

C = 450/2(4) + 100/450(3)

C = 450(2) + 30/45

C = 900 + 0.7

C = 900.7

The ordering cost using Wagner-Whitin algorithm will be:

= 300 + 900 + 300 + 1700 + 2150 + 600

= 5750

The ordering cost using fixed order quantity will be:

= 6/(300 + 450 + 100 + 450 + 450 + 100)

= 6/1850

= 0.00324

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