Math Problem Statement
Suppose that in the inventory problem, the storage cost depends on the maximum inventory size, rather than the average. In this case, the number of units that should be ordered or manufactured to minimize the total cost is qequalsStartRoot StartFraction fM Over k EndFraction EndRoot . A book publisher wants to know how many times a year a print run should be scheduled. Suppose it costs $1200 to set up the printing process, and the subsequent cost per book is so low it can be ignored. Suppose further that the annual warehouse cost is $4 times the maximum number of books stored. Assuming 5600 copies of the book are needed per year, how many books should be printed in each print run?
Solution
We are dealing with an inventory problem where the storage cost depends on the maximum inventory size, rather than the average. The goal is to determine the optimal quantity to print per run that minimizes total costs.
The formula for the optimal order quantity in this setting is:
where:
- = Fixed setup cost per run ($1200)
- = Annual demand (5600 copies)
- = Storage cost per unit ($4 per book stored)
Step 1: Substituting known values into the formula
Given:
Step 2: Simplifying the expression inside the square root
Step 3: Calculating the square root
Since the number of books must be a whole number, we round it to 1833 books per run.
Step 4: Conclusion
The optimal number of books to print per print run is approximately 1833 books.
Would you like further clarifications or additional insights?
Here are 5 related questions you might find useful:
- How does this solution change if the storage cost depends on the average inventory?
- What if the fixed setup cost increases? How would that impact the optimal print run size?
- How do we calculate the total annual cost with this order quantity?
- What happens if the demand increases to 10,000 books per year?
- How would we handle non-negligible per-unit production costs in this calculation?
Tip: The formula used here is a variation of the Economic Order Quantity (EOQ) model, with modifications for maximum inventory cost.
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Math Problem Analysis
Mathematical Concepts
Inventory Management
Optimization
Algebra
Formulas
q^* = \sqrt{\frac{2 \cdot f \cdot M}{k}} (Economic Order Quantity model with storage costs based on maximum inventory)
Theorems
Economic Order Quantity (EOQ) Model
Suitable Grade Level
College Level / Advanced High School
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