22. A purchasing agent for a particular type of silicon wafer used in the production ofsemiconductors must decide among three sources. Source A will sell the siliconwafers for $2.50 per wafer, independently of the number of wafers ordered. Source Bwill sell the wafers for $2.40 each but will not consider an order for fewer than3,000 wafers, and Source C will sell the wafers for $2.30 each but will not acceptan order for fewer than 4,000 wafers. Assume an order setup cost of $100 and anannual requirement of 20,000 wafers. Assume a 20 percent annual interest rate forholding cost calculations.a. Which source should be used, and what is the size of the standing order?b. What is the optimal value of the holding and setup costs for wafers when theoptimal source is used?c. If the replenishment lead time for wafers is three months, determine the reorderpoint based on the on-hand level of inventory of wafers.

Given- Annual Demand (D) = 20000Ordering cost (S) = $100Holding cost (H)= 20%

Answered: 22. A purchasing agent for a particular…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter7: Nonlinear Optimization Models

Section7.3: Pricing Models

Problem 1P

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