Consider the EOQ Model for Multiple Products That Are Independent

question 51

Essay

Consider the EOQ model for multiple products that are independent except for a budget restriction. The following model describes this situation:
Let Dk = annual demand for product k
Ck = unit cost of product k
Sk = cost per order placed for product k
i = inventory carrying charge as a percentage of the cost per unit
B = the maximum amount of investment in goods
N = number of products
The decision variables are Qk, the amount of product k to order. The model is:

s.t.


a. Set up a spreadsheet model and for the following data:

b. Solve the problem using Excel Solver. (Hint: For Solver to find a solution, you need to start with decision variable values that are greater than 0.)

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Definitions:

Credit

A financial arrangement where a borrower receives something of value now and agrees to repay the lender at a later date, generally with interest.

Effective Annual Interest Rate

The interest rate on a loan or financial product restated from the nominal rate as an annual rate that takes into account compounding over a given period.

Terms Of Sale

The conditions agreed upon between a buyer and a seller regarding the purchase of goods, including payment and delivery.

Credit

The ability of a borrower to obtain goods or services before payment, based on the trust that payment will be made in the future.