CU, Incorporated (CUI), produces copper contacts that it uses in switches and re
ID: 2747320 • Letter: C
Question
CU, Incorporated (CUI), produces copper contacts that it uses in switches and relays. CUI needs to determine the order quantity, Q, to meet the annual demand at the lowest cost. The price of copper depends on the quantity ordered. Here are price-break and other data for the problem:
$30
Which quantity should be ordered? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
CU, Incorporated (CUI), produces copper contacts that it uses in switches and relays. CUI needs to determine the order quantity, Q, to meet the annual demand at the lowest cost. The price of copper depends on the quantity ordered. Here are price-break and other data for the problem:
Price of copper $0.80 per pound up to 2,499 pounds $0.79 per pound for orders between 2,500 and 4,999 pounds $0.78 per pound for orders of 5,000 pounds or more Annual demand 54,000 pounds per year Holding cost 25 percent per unit per year of the price of the copper Ordering cost$30
Explanation / Answer
Co 30 Cc 0.2 D 54000 Order Size Price/pound from to 0 2499 0.8 2499 4999 0.79 5000 + 0.78 EOQ 4024.922 = SQRT(2*54000*30/0.2) TC AT EOQ = 43092.49 = 54000*30/4025+4025*0.2/2+4025*0.79 IF ORDERED 5000 UNITS TC = 42944 54000*30/5000+5000*0.2/2+54000*0.78 HENCE 5000 QTY SHOULD BE ORDERED AS TOTAL COST REDUCES BY ORDERING 5000 UNITS