Answer:
Step-by-step explanation:
A) Demand per month= 40 cars
Annual Demand (D)= 12*40 = 480
Fixed Cost per order (K)= 15
Holding Cost= 20% of cost= 60 *0.2 = 12
a. Economic Order Quantity=
Q^{*}={\sqrt {{\frac {2DK}{h}}}}
= √(2*480*15)/12
=34.64 ~ 35
Total Cost =P*D+K(D/EOQ)+h(EOQ/2) P= Cost per unit
= 60*480+ 15(480/35) + 12(35/2)
= 28800+ 205.71+ 210
=$29215.71
B). Backorder Cost (b)= $45
Qbo= Q* × √( b+h/ h)
= 35*√(12+45/ 45)
= 35* 1.12
=39.28 ~ 39
Shortage (S)= Qbo * (K/K+b)
= 39* (15/15+45)
= 39* 0.25
= 9.75
Total Cost Minimum=( bS2/ 2Qbo) + P (Qbo- S)2/2Qbo + K(D/Qbo)
=45* 9.752 / 2* 392 + 60 (39-9.75)2/ 2* 392 + 15 ( 480/39)
= 1.40+ 21.9.+ 184.61
=$207.91
C)Length of backorder days (d) = Demand ÷ amount of working days
d = 480 ÷ 300
d = 1.6
Calculate the backorders as the maximum number of backorders divided by the demand per day
s/d = 9.75/1.6 = 6.09 days (answer)
D) Calculate the difference in total between not using backorder:
$207.85 + $207.85 - 207.91 = $207.79
The saving in using backorder is $207.79.
Therefore I would recommend using a backorder
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