Exercise 13-16: Electronics Manufacturer
Inputs 40-GB 20-GB 6-GB
Expected demand, D20,000 40,000 80,000
Standard deviation of demand, σD7,000 11,000 16,000
Unit costs, C$100 $90 $70
Sales price, p$200 $150 $100
Discount price $0 $0 $0
Inventory holding costs for season $0 $0 $0
Salvage value, s$80 $70 $50
Cost of understocking, Cu$100 $60 $30
Cost of overstocking, Co$20 $20 $20
Outputs
Optimal cycle service level, CSL 0.8333 0.7500 0.6000 Total
Optimal order quantity 26,772 47,419 84,054 158,245
Expected profits $1,790,125 $2,120,357 $2,090,926 $6,001,408
Expected overstock 7,392 9,060 8,614 25,066
CR – 12/3/2020 10:03 AM Page 1 13-16.xlsx – 13.16a
Exercise 13-16: Electronics Manufacturer
Inputs 40-GB 20-GB 6-GB
Expected demand, D20,000 40,000 80,000
Standard deviation of demand, σD7,000 11,000 16,000
Unit costs, C$100 $90 $70
Sales price, p$200 $150 $100
Discount price $0 $0 $0
Inventory holding costs for season $0 $0 $0
Salvage value, s$80 $70 $50
Cost of understocking, Cu$100 $60 $30
Cost of overstocking, Co$20 $20 $20
Outputs Total
Order quantity 20,000 40,000 80,000 140,000
Cycle service level, CSL 0.5000 0.5000 0.5000
Expected profits $1,664,888 $2,048,931 $2,080,846 $5,794,665
Expected overstock 2,793 4,388 6,383 13,564
CR – 12/3/2020 10:03 AM Page 2 13-16.xlsx – 13.16b
Exercise 13-16: Electronics Manufacturer
Inputs 40-GB 20-GB 6-GB
Expected demand, D20,000 40,000 80,000
Standard deviation of demand, σD7,000 11,000 16,000
Unit costs, C$100 $90 $70
Sales price, p$200 $150 $100
Discount price $0 $0 $0
Inventory holding costs for season $0 $0 $0
Salvage value, s$80 $70 $50
Cost of understocking, CU$100 $60 $30
Cost of overstocking, CO$20 $20 $20
With Capacity Constraints (Specified order)
Cycle service level, CSL 0.5000 0.5000 0.5000 Total
Order quantity 20,000 40,000 80,000 140,000
Expected profits $1,664,888 $2,048,931 $2,080,846 $5,794,665
Expected overstock 2,793 4,388 6,383 13,564
With Capacity Constraints (Optimal Order)
Optimal order quantity 24,182 42,428 73,390 140,000
Optimal order quantities
Cycle service level, CSL 0.725 0.587 0.340
Expected profits 1,774,084$ 2,088,974$ 2,020,939$ $5,883,996
Expected overstock 5,368 5,709 3,615 14,692