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 =
Fixed cost per order, S=
Cost per engine, C =
Holding cost, h=

109,500 (assuming 365 operating days)

1,000
500
20%

$
$

Output
EOQ =
# of orders per year
Annual Order Cost
Cycle inventory (units)
Cycle inventory (value)
Annual Holding Cost
Total Inventory Cost

1,480
74
73,993
740
369,966
73,993
147,986

$
$

Order Size Increment =

Order
Size
300
320
340
360
380
400
420
440
460
480
500
520
540
560
580
600
620
640
660
680

20
Annual
Order Cost
$365,000
$342,188
$322,059
$304,167
$288,158
$273,750
$260,714
$248,864
$238,043
$228,125
$219,000
$210,577
$202,778
$195,536
$188,793
$182,500
$176,613
$171,094
$165,909
$161,029

Holding Cost
$15,000
$16,000
$17,000
$18,000
$19,000
$20,000
$21,000
$22,000
$23,000
$24,000
$25,000
$26,000
$27,000
$28,000
$29,000
$30,000
$31,000
$32,000
$33,000
$34,000

Page 1

Total
Cost
$380,000
$358,188
$339,059
$322,167
$307,158
$293,750
$281,714
$270,864
$261,043
$252,125
$244,000
$236,577
$229,778
$223,536
$217,793
$212,500
$207,613
$203,094
$198,909
$195,029

VALUES
700
720
740
760
780
800
820
840
860
880
900
920
940
960
980
1000
1020
1040
1060
1080
1100
1120
1140
1160
1180
1200
1220
1240
1260
1280
1300
1320
1340
1360
1380
1400
1420
1440
1460
1480
1500
1520
1540
1560
1580
1600
1620
1640

$156,429
$152,083
$147,973
$144,079
$140,385
$136,875
$133,537
$130,357
$127,326
$124,432
$121,667
$119,022
$116,489
$114,063
$111,735
$109,500
$107,353
$105,288
$103,302
$101,389
$99,545
$97,768
$96,053
$94,397
$92,797
$91,250
$89,754
$88,306
$86,905
$85,547
$84,231
$82,955
$81,716
$80,515
$79,348
$78,214
$77,113
$76,042
$75,000
$73,986
$73,000
$72,039
$71,104
$70,192
$69,304
$68,438
$67,593
$66,768

$35,000
$36,000
$37,000
$38,000
$39,000
$40,000
$41,000
$42,000
$43,000
$44,000
$45,000
$46,000
$47,000
$48,000
$49,000
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
$58,000
$59,000
$60,000
$61,000
$62,000
$63,000
$64,000
$65,000
$66,000
$67,000
$68,000
$69,000
$70,000
$71,000
$72,000
$73,000
$74,000
$75,000
$76,000
$77,000
$78,000
$79,000
$80,000
$81,000
$82,000

Page 2

$191,429
$188,083
$184,973
$182,079
$179,385
$176,875
$174,537
$172,357
$170,326
$168,432
$166,667
$165,022
$163,489
$162,063
$160,735
$159,500
$158,353
$157,288
$156,302
$155,389
$154,545
$153,768
$153,053
$152,397
$151,797
$151,250
$150,754
$150,306
$149,905
$149,547
$149,231
$148,955
$148,716
$148,515
$148,348
$148,214
$148,113
$148,042
$148,000
$147,986
$148,000
$148,039
$148,104
$148,192
$148,304
$148,438
$148,593
$148,768

VALUES
1660
1680
1700
1720
1740
1760
1780
1800
1820
1840
1860
1880
1900
1920
1940
1960
1980

$65,964
$65,179
$64,412
$63,663
$62,931
$62,216
$61,517
$60,833
$60,165
$59,511
$58,871
$58,245
$57,632
$57,031
$56,443
$55,867
$55,303

$83,000
$84,000
$85,000
$86,000
$87,000
$88,000
$89,000
$90,000
$91,000
$92,000
$93,000
$94,000
$95,000
$96,000
$97,000
$98,000
$99,000

Page 3

$148,964
$149,179
$149,412
$149,663
$149,931
$150,216
$150,517
$150,833
$151,165
$151,511
$151,871
$152,245
$152,632
$153,031
$153,443
$153,867
$154,303

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

Cost

$250,000
Annual Order Cost
Holding Cost

$200,000

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 =
Fixed cost per order, S=
Cost per engine, C =
Holding cost, h=

109,500 (assuming 365 operating days)

1,000
500
20%

$
$

Output
EOQ =
# of orders per year
Annual Order Cost
Cycle inventory (units)
Cycle inventory (value)
Annual Holding Cost
Total Inventory Cost

1,480
74
73,993
740
369,966
73,993
147,986

$
$

Order Size Increment =

Order
Size
300
320
340
360
380
400
420
440
460
480
500
520
540
560
580
600
620
640
660
680

20
Annual
Order Cost
$365,000
$342,188
$322,059
$304,167
$288,158
$273,750
$260,714
$248,864
$238,043
$228,125
$219,000
$210,577
$202,778
$195,536
$188,793
$182,500
$176,613
$171,094
$165,909
$161,029

Holding Cost
$15,000
$16,000
$17,000
$18,000
$19,000
$20,000
$21,000
$22,000
$23,000
$24,000
$25,000
$26,000
$27,000
$28,000
$29,000
$30,000
$31,000
$32,000
$33,000
$34,000

Page 8

Total
Cost
$380,000
$358,188
$339,059
$322,167
$307,158
$293,750
$281,714
$270,864
$261,043
$252,125
$244,000
$236,577
$229,778
$223,536
$217,793
$212,500
$207,613
$203,094
$198,909
$195,029

FORMULAS
700
720
740
760
780
800
820
840
860
880
900
920
940
960
980
1000
1020
1040
1060
1080
1100
1120
1140
1160
1180
1200
1220
1240
1260
1280
1300
1320
1340
1360
1380
1400
1420
1440
1460
1480
1500
1520
1540
1560
1580
1600
1620
1640

$156,429
$152,083
$147,973
$144,079
$140,385
$136,875
$133,537
$130,357
$127,326
$124,432
$121,667
$119,022
$116,489
$114,063
$111,735
$109,500
$107,353
$105,288
$103,302
$101,389
$99,545
$97,768
$96,053
$94,397
$92,797
$91,250
$89,754
$88,306
$86,905
$85,547
$84,231
$82,955
$81,716
$80,515
$79,348
$78,214
$77,113
$76,042
$75,000
$73,986
$73,000
$72,039
$71,104
$70,192
$69,304
$68,438
$67,593
$66,768

$35,000
$36,000
$37,000
$38,000
$39,000
$40,000
$41,000
$42,000
$43,000
$44,000
$45,000
$46,000
$47,000
$48,000
$49,000
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
$58,000
$59,000
$60,000
$61,000
$62,000
$63,000
$64,000
$65,000
$66,000
$67,000
$68,000
$69,000
$70,000
$71,000
$72,000
$73,000
$74,000
$75,000
$76,000
$77,000
$78,000
$79,000
$80,000
$81,000
$82,000

Page 9

$191,429
$188,083
$184,973
$182,079
$179,385
$176,875
$174,537
$172,357
$170,326
$168,432
$166,667
$165,022
$163,489
$162,063
$160,735
$159,500
$158,353
$157,288
$156,302
$155,389
$154,545
$153,768
$153,053
$152,397
$151,797
$151,250
$150,754
$150,306
$149,905
$149,547
$149,231
$148,955
$148,716
$148,515
$148,348
$148,214
$148,113
$148,042
$148,000
$147,986
$148,000
$148,039
$148,104
$148,192
$148,304
$148,438
$148,593
$148,768

FORMULAS
1660
1680
1700
1720
1740
1760
1780
1800
1820
1840
1860
1880
1900
1920
1940
1960
1980

$65,964
$65,179
$64,412
$63,663
$62,931
$62,216
$61,517
$60,833
$60,165
$59,511
$58,871
$58,245
$57,632
$57,031
$56,443
$55,867
$55,303

$83,000
$84,000
$85,000
$86,000
$87,000
$88,000
$89,000
$90,000
$91,000
$92,000
$93,000
$94,000
$95,000
$96,000
$97,000
$98,000
$99,000

Page 10

$148,964
$149,179
$149,412
$149,663
$149,931
$150,216
$150,517
$150,833
$151,165
$151,511
$151,871
$152,245
$152,632
$153,031
$153,443
$153,867
$154,303

FORMULAS

assembly
cks. Each
les each
year. How
of engines

65 operating days)

Page 11

FORMULAS

Page 12

FORMULAS

Page 13