Copy of Copy of Copy of Gentle Electric Part 2

Exercise Solution Gentle Electric Company

Name: Uzoigwe kelechi_jennifer Objective:  To decide decide the ordering policy at Gentle electric for transformers used in the  production of control units for passenger and freight elevators. Analyi: With With the information compiled my Mr. Edison we can calculate the total inventory cost for gentle electric. The total annual cost equation can be written as below.  Annual Total Total Cost  Cost = = Material cost + Ordering cost + Inventory Carrying cost + Transportation cost + Unloading cost + Additional warehouse space cost (when required) lease provide your logic!formula used to calculate the following cost components.  Material  Material Costtotal Costtotal !i"ed costs costs +total cost cost #total unit unit produced  produced 

Ordering Cost!i"ed cost$requisitions per nu%&er o! orders in a year $cost o! each order

 Inventory  Inventory 'olding cost This is calculated as a fraction of the inventory investment x the average inventory" The holding cost will be # $ % x &u x '(!)* + where, ( is the order quantity under consideration. Given that you do not have hav e information about the lead time and the demand" assume a constant rate of depletion for the inventory thus the average inventory will be (!). % is the fraction of the inventory investment representing the holding cost. &u is the cost per unit.

Exercise Solution

Exercise Solution 0ppendix, lease insert a copy of the table from excel and a graph of the final cost behavior as it changes with order (uantity.