Question

The office manager for the Gotham Life Insurance Company orders letterhead stationery from an office products firm in boxes of 500 sheets. The company uses 6,500 boxes per year. Annual carrying costs are $3 per box, and ordering costs are $28. The following discount price schedule is provided by the office supply company: Order Quantity (in boxes) Price per Box 200-999 $16 1000-2999 14 3000-5999 13 6000+ 12 a. Determine the optimal order quantity and the total annual inventory cost. b. Determine the optimal order quantity and total annual inventory cost for boxes of stationery if the carrying cost is 20% of the price of a box of stationery.

ORDERING |
ORDERING |
ORDERING |
ORDERING |

EOQ |
1,000 |
3,000 |
6,000 |

Answer #1

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13-29. The office manager for the Metro Life Insurance Company
orders letterhead stationery from an office product firm in boxes
of 500 sheets. The company uses 6500 boxes per year. Annual
carrying costs are $3 per box, and ordering costs are $28. The
following discount price schedule is provided by the office supply
company:
Order Quantity (boxes) Price per Box
200–999 $16
1000–2999 14
3000–5999 13
6000+ 12
A. Determine the optimal order quantity and the total annual
inventory cost....

Suppose Stanley's Office Supply purchases 90,000 boxes of pens
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is 5,669.92 boxes. Note: The ordering costs and EOQ differ from
problem 1. The vendor now offers a quantity discount of $0.02 per
box if the company buys pens in order sizes of 10,000 boxes.
Determine the before-tax benefit or loss of accepting the quantity
discount. (Assume the carrying...

Using the data from problem 13, Big Box Office Supply (BBOS) is
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the EOQ. Determine the before–tax benefit or loss of accepting the
quantity discount. (Assume the carrying cost remains at $3.50 per
chair whether or not the discount is taken.) Data from # 13...

Part A
Suppose Big Box Office Supply (BBOS) purchases 100,000 office
chairs every year. Ordering costs are $95.00 per order and carrying
costs are $5.25 per chair.
a) What is BBOS’s total inventory cost per year, including both
carrying costs and ordering costs, if BBOS orders the EOQ of office
chairs?
Part B
Using the same data as Part A, Big Box Office Supply (BBOS) is
able to negotiate a reduction in the carrying costs to $3.50 per
chair, but...

Suppose Stanley's Office Supply purchases 50,000 boxes of pens
every year. Ordering costs are $100 per order, carrying costs are
5% of the inventory value, and the price is of $2.00 per box. The
vendor now offers a quantity discount of 1% per box if the company
buys pens in order sizes of 20,000 boxes. Should the company accept
the quantity discount? Show your calculations to justify your
decision.

10. Suppose Stanley's Office Supply purchases 50,000 boxes of
pens every year. Ordering costs are $100 per order, carrying costs
are 5% of the inventory value, and the price is of $2.00 per box.
The vendor now offers a quantity discount of 1% per box if the
company buys pens in order sizes of 20,000 boxes. Should the
company accept the quantity discount? Show your calculations to
justify your decision.

Thomas Kratzer is the purchasing manager for the headquarters of
a large insurance company chain with a central inventory operation.
Thomas's fastest-moving inventory item has a demand of 5,950 units
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order. It takes about 5 days for an order to arrive, and the demand
for 1 week is 119 units. (This is a...

The Western Jeans Company purchases denim from Cumberland
Textile Mills. The Western Jeans Company uses 35,000 yards of denim
per year to make jeans. The cost of ordering denim from the textile
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A large law firm uses an average of 50 boxes of copier paper a
day. The firm operates 260 days a year. Storage and handling costs
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a. What order size would minimize the sum of annual ordering and
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b. Compute the total annual cost using your order size from part
a
c. Except for rounding, are...

SHOW ALL STEPS, FORMULAS, AND EXPLANATIONS
A large law firm uses an average of 40 boxes of copier paper a
day. The firm operates 260 days a year. Storage and handling costs
for the paper are $30 a year per box, and it costs approximately
$60 to order and receive a shipment of paper.
a. What order size would minimize the sum of
annual ordering and carrying costs?
b. Compute the total annual cost using your
order size from part...

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