Exercise 11-1: Harley Davidson
Input
Demand, D = 109,500
(assuming 365 operating days)
Fixed cost per order, S= 1,000$
Cost per engine, C = 500$
Holding cost, h=20%
Output
EOQ = 1,480
# of orders per year 74
Annual order cost 73,993$
Cycle inventory (units) 740
Cycle inventory (value) 369,966
Annual holding cost 73,993$
Total inventory cost 147,986$
Order Size Increment = 20
Order Annual Total
Size Order Cost Holding Cost Cost
300 $365,000 $15,000 $380,000
320 $342,188 $16,000 $358,188
340 $322,059 $17,000 $339,059
360 $304,167 $18,000 $322,167
380 $288,158 $19,000 $307,158
400 $273,750 $20,000 $293,750
420 $260,714 $21,000 $281,714
440 $248,864 $22,000 $270,864
460 $238,043 $23,000 $261,043
480 $228,125 $24,000 $252,125
500 $219,000 $25,000 $244,000
520 $210,577 $26,000 $236,577
540 $202,778 $27,000 $229,778
560 $195,536 $28,000 $223,536
580 $188,793 $29,000 $217,793
600 $182,500 $30,000 $212,500
620 $176,613 $31,000 $207,613
Harley Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly
plant in Pennsylvania. Engines are transported between the two plants using trucks. Each
truck trip costs $1,000. The motorcycle plant assembles and sells 300 motorcycles each
day. Each engine costs $500 and Harley incurs a holding cost of 20 percent per year. How
many engines should Harley load onto each truck? What is the cycle inventory of engines at
Harley?
VALUES
640 $171,094 $32,000 $203,094
660 $165,909 $33,000 $198,909
680 $161,029 $34,000 $195,029
700 $156,429 $35,000 $191,429
720 $152,083 $36,000 $188,083
740 $147,973 $37,000 $184,973
760 $144,079 $38,000 $182,079
780 $140,385 $39,000 $179,385
800 $136,875 $40,000 $176,875
820 $133,537 $41,000 $174,537
840 $130,357 $42,000 $172,357
CHART
Page 4
$0
$50,000
$400,000
Order Quantity
Costs vs. Order Quantity