VALUES

Excersise 10-1: Harley Davidson

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?

Input
Demand, R = 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
640 $171,094 $32,000 $203,094
660 $165,909 $33,000 $198,909
680 $161,029 $34,000 $195,029

Page 1
 VALUES

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
860 $127,326 $43,000 $170,326
880 $124,432 $44,000 $168,432
900 $121,667 $45,000 $166,667
920 $119,022 $46,000 $165,022
940 $116,489 $47,000 $163,489
960 $114,063 $48,000 $162,063
980 $111,735 $49,000 $160,735
1000 $109,500 $50,000 $159,500
1020 $107,353 $51,000 $158,353
1040 $105,288 $52,000 $157,288
1060 $103,302 $53,000 $156,302
1080 $101,389 $54,000 $155,389
1100 $99,545 $55,000 $154,545
1120 $97,768 $56,000 $153,768
1140 $96,053 $57,000 $153,053
1160 $94,397 $58,000 $152,397
1180 $92,797 $59,000 $151,797
1200 $91,250 $60,000 $151,250
1220 $89,754 $61,000 $150,754
1240 $88,306 $62,000 $150,306
1260 $86,905 $63,000 $149,905
1280 $85,547 $64,000 $149,547
1300 $84,231 $65,000 $149,231
1320 $82,955 $66,000 $148,955
1340 $81,716 $67,000 $148,716
1360 $80,515 $68,000 $148,515
1380 $79,348 $69,000 $148,348
1400 $78,214 $70,000 $148,214
1420 $77,113 $71,000 $148,113
1440 $76,042 $72,000 $148,042
1460 $75,000 $73,000 $148,000
1480 $73,986 $74,000 $147,986
1500 $73,000 $75,000 $148,000
1520 $72,039 $76,000 $148,039
1540 $71,104 $77,000 $148,104
1560 $70,192 $78,000 $148,192
1580 $69,304 $79,000 $148,304
1600 $68,438 $80,000 $148,438
1620 $67,593 $81,000 $148,593
1640 $66,768 $82,000 $148,768

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 VALUES

1660 $65,964 $83,000 $148,964

1680 $65,179 $84,000 $149,179
1700 $64,412 $85,000 $149,412
1720 $63,663 $86,000 $149,663
1740 $62,931 $87,000 $149,931
1760 $62,216 $88,000 $150,216
1780 $61,517 $89,000 $150,517
1800 $60,833 $90,000 $150,833
1820 $60,165 $91,000 $151,165
1840 $59,511 $92,000 $151,511
1860 $58,871 $93,000 $151,871
1880 $58,245 $94,000 $152,245
1900 $57,632 $95,000 $152,632
1920 $57,031 $96,000 $153,031
1940 $56,443 $97,000 $153,443
1960 $55,867 $98,000 $153,867
1980 $55,303 $99,000 $154,303

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 VALUES

assembly
cks. Each
les each
year. How
of engines

65 operating days)

Page 4
VALUES

Page 5
VALUES

Page 6
 CHART

Costs vs. Order Quantity

$400,000

$350,000

$300,000

$250,000
Cost

Annual Order Cost

$200,000 Holding Cost
Total Cost

$150,000

$100,000

$50,000

$0

Order Quantity

Page 7
 FORMULAS

Excersise 7-1: Harley Davidson

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?

Input
Demand, R = 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
640 $171,094 $32,000 $203,094
660 $165,909 $33,000 $198,909
680 $161,029 $34,000 $195,029

Page 8
 FORMULAS

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
860 $127,326 $43,000 $170,326
880 $124,432 $44,000 $168,432
900 $121,667 $45,000 $166,667
920 $119,022 $46,000 $165,022
940 $116,489 $47,000 $163,489
960 $114,063 $48,000 $162,063
980 $111,735 $49,000 $160,735
1000 $109,500 $50,000 $159,500
1020 $107,353 $51,000 $158,353
1040 $105,288 $52,000 $157,288
1060 $103,302 $53,000 $156,302
1080 $101,389 $54,000 $155,389
1100 $99,545 $55,000 $154,545
1120 $97,768 $56,000 $153,768
1140 $96,053 $57,000 $153,053
1160 $94,397 $58,000 $152,397
1180 $92,797 $59,000 $151,797
1200 $91,250 $60,000 $151,250
1220 $89,754 $61,000 $150,754
1240 $88,306 $62,000 $150,306
1260 $86,905 $63,000 $149,905
1280 $85,547 $64,000 $149,547
1300 $84,231 $65,000 $149,231
1320 $82,955 $66,000 $148,955
1340 $81,716 $67,000 $148,716
1360 $80,515 $68,000 $148,515
1380 $79,348 $69,000 $148,348
1400 $78,214 $70,000 $148,214
1420 $77,113 $71,000 $148,113
1440 $76,042 $72,000 $148,042
1460 $75,000 $73,000 $148,000
1480 $73,986 $74,000 $147,986
1500 $73,000 $75,000 $148,000
1520 $72,039 $76,000 $148,039
1540 $71,104 $77,000 $148,104
1560 $70,192 $78,000 $148,192
1580 $69,304 $79,000 $148,304
1600 $68,438 $80,000 $148,438
1620 $67,593 $81,000 $148,593
1640 $66,768 $82,000 $148,768

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 FORMULAS

1660 $65,964 $83,000 $148,964

1680 $65,179 $84,000 $149,179
1700 $64,412 $85,000 $149,412
1720 $63,663 $86,000 $149,663
1740 $62,931 $87,000 $149,931
1760 $62,216 $88,000 $150,216
1780 $61,517 $89,000 $150,517
1800 $60,833 $90,000 $150,833
1820 $60,165 $91,000 $151,165
1840 $59,511 $92,000 $151,511
1860 $58,871 $93,000 $151,871
1880 $58,245 $94,000 $152,245
1900 $57,632 $95,000 $152,632
1920 $57,031 $96,000 $153,031
1940 $56,443 $97,000 $153,443
1960 $55,867 $98,000 $153,867
1980 $55,303 $99,000 $154,303

Page 10
 FORMULAS

assembly
cks. Each
les each
year. How
of engines

65 operating days)

Page 11
FORMULAS

Page 12
FORMULAS

Page 13