Project #1423 - Algebra

Metal Containers asks you to determine how best to order the brackets it uses on its boxes. You are able to obtain the following information: The company uses approximately 100,000 brackets a year, and the purchase price of each is $5. It buys the same number of brackets (say, n) each time it places an order with the supplier, and it costs $60 to process each order. Metal Containers also has additional costs associated with storing, insuring, and financing its inventory of brackets. These carrying costs amount to 15% of the average value of inventory annually. The brackets are used steadily, and deliveries are made just as inventory reaches zero so that inventory fluctuates between zero and n brackets.

 

4. If the total annual cost associated with the bracket supply is the sum of the annual purchasing cost and the annual carrying costs, what order size n would minimize the total cost?

5. In the general case of the bracket-ordering problem, the order size n that minimizes the total cost of the bracket supply is called the economic order quantity, or EOQ. Use the following notations to determine a general formula for the EOQ.

 

Fixed cost per order = F

Unit cost = C

Quantity purchased per year = P

Carrying cost (as a decimal rate) = r

 

Subject Mathematics
Due By (Pacific Time) 12/02/2012 08:00 pm
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