Lgt 3105 Operations Management - Individual Assignment Case Study – Jamie Chang
Autor: Rachel • March 11, 2018 • 2,123 Words (9 Pages) • 1,401 Views
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After the above adjustments, the new EOQ was calculated as follows:
Product
Yearly Demand (Units)
Present Order Quantity
Setup Hour
per Order
Product Unit Cost($)
Appropriated
EOQ
A
3,200,000
140,000
6.0
1.195
38218.21
B
2,000,000
80,000
5.0
0.587
39353.61
C
5,600,000
300,000
6.5
0.605
73956.55
D
1,200,000
100,000
4.5
0.745
25669.8
E
400,000
60,000
4.0
1.041
11820.57
F
960,000
160,000
2.5
0.625
18683.97
G
320,000
40,000
4.5
0.815
12673.78
H
1,440,000
180,000
3.0
0.878
21149.41
1,060,000
241525.9
The formula is √(2*annual demand*setup hour per order*setup cost per hour)/(holding cost percentage*product unit cost)
For each product:
Product
The formula
EOQ
A
√(2*3,200,000*6*10)/(.22*1.195)
38218.21
B
√(2*3,200,000*5*10)/(.22*0.587)
39353.61
C
√(2*3,200,000*6.5*10)/(.22*0.605)
73956.55
D
√(2*3,200,000*4.5*10)/(.22*0.745)
25669.8
E
√(2*3,200,000*4*10)/(.22*1.041)
11820.57
F
√(2*3,200,000*2.5*10)/(.22*0.625)
18683.97
G
√(2*3,200,000*4.5*10)/(.22*0.815)
12673.78
H
√(2*3,200,000*3*10)/(.22*0.878)
21149.41
Q2. What did Jamie Chang overlook in the EOQ study shown to Garcia?
In the case, after Jamie gave the incorrect EOQ study to Garcia, and considered what Garcia response, it already showed that what Jamie did overlook.
Jamie did compute the EOQ, and believed it can help to ease the existing problem of the company. Jamie’s EOQ study only presented the optimal order quantity of each product and showed that it could obtain a deduction of inventory of each product. However, Jamie did overlook the effect of implementing EOQ in reality. It will then affect the setup cost, inventory holding cost and the total cost. Total cost is the sum of setup cost and inventory holding cost, which can be calculated by using this formula:
Total Cost = (Quantity * Holding cost)/2 + Annual demand/Quantity * setup cost (Assumption: Excluding the product cost in the calculation as it does not have a huge effect in the result)
Present Order Quantities
Product
Order quantity
Product unit cost($)
Setup Hours
Total Setup cost($)
Total Holding Cost($)
Total cost($)
A
140,000
1.195
137.1
1,371
18,403
19,774
B
80,000
0.587
125
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