Operations Management: Inventory Managment – EOQ – #29458


Question: Question 2: A company that specialises in a particular brand of vinyl wallpapers wishes to outsell other stores next year in the total number of rolls of this brand. The estimated demand function is as follows:

Number of rolls of wallpaper sold = 20 x dollars spent on advertising + 6.8 x dollars spent on in-store displays + 12 x dollars invested in on-hand wallpaper inventory – 65000 x percentage markup taken above wholesale cost of a roll.

The store budgets a total of $17,000 for advertising, in-store displays, and on-hand inventory of the wallpaper for next year. It decides it must spend at least $3,000 on advertising; in addition, at least 5% of the amount invested in on-hand inventory should be devoted to displays. Mark ups on the wallpaper seen at other local stores range from 20% to 45%. The company decides that its markup had best be in this range as well.

a) Manually show the decision variables, objective function and constraints. Method is shown on lecture slides.

b) Solve using Excel’s ‘Solver’ and state the number of rolls the company expects to sell next year.

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