Question

A retailer purchases a certain type of chemical from a supplier on the following quantity discount schedule: • If the order amount is less than 100 kg.s, the supplier charges $30 per kg. • If the order amount is at least 100 kg.s and less than 500 kg.s, the supplier applies an incremental discount where the ﬁrst 100 kg. costs $30 per kg. and the remaining amount costs $28 per kg. • If the order amount is at least 500 kg.s, the supplier applies an all-units discount and charges $28 per kg. for all units. The ordering cost is $100 per order and the retail owner assumes an annual holding cost based on the annual inﬂation rate which is 25%. The annual demand of this chemical to retailer is 800 kg.s and the demand rate stays constant in the planning horizon. Back-ordering is disallowed and both the retailer and the supplier works for 365 days in a year. Find the economic order quantity and the order cycle time (in days) that minimizes the total inventory cost. Calculate the minimum total annual inventory cost. Carry out the whole analysis and show all of your calculations. **how is the total cost calculated?**

Answer #1

1. EOQ = [ 2 * Annual demand * Ordering cost / Cost of holding one unit per year]^(1/2)

**EOQ = [ 2 * 800 * 100 / (0.25*30)]^(1/2) =
146**

**2. For 146 Units, Total Cost = 100 * 30 + 46 * 28 =
$4288**

**Cost per Unit = Total Cost / EOQ = 4288 / 146 =
$29.36**

New EOQ with Cost per unit of $29..36 = [ 2 * Annual demand * Ordering cost / Cost of holding one unit per year]^(1/2)

New EOQ with Cost per unit of $29..36 = [ 2 * 800 * 100 / 0.25 * 29.36]^(1/2)

**New EOQ with Cost per unit of $29..36 = 148
Units**

**2. Order Cycle in Days = 365 Days * EOQ / Annual Demand
= 365 * 148 / 800 = 67.525**

**3. cost of inventory = holding cost + ordering cost =
(EOQ /2) * 29.36 * 0.25 + 100 * (800/148) = 540.54 + 543.16 =
$1084**

A quantity discount of 10% in existing unit price is offered,
provided order and supply quantity is at least 500 units.
The following information is given:
Annual demand - 1000 numbers
Procurement cost per order - Rs 100
Inventory carrying cost per annum- 22% of the acquisition
cost
Existing unit price ( acquisition cost ) Rs 10
What will be the annual saving ( if any) if discount is availed
of, instead of ordering out as per EOQ based on...

XYZ is a retailer and sells 162,000 units per year. It purchases
from a single supplier. Fixed costs per order are $931 and carrying
cost is $14 per unit per year. In economic order quantity model,
what would be the lowest total inventory cost? That is, the lowest
sum of total carrying cost and total shortage cost.

1.XYZ is a retailer and sells 144,000 units per year.
It purchases from a single supplier. Fixed costs per order are
$846 and carrying cost is $8 per unit. How many units should XYZ
purchase per order? That is, what is the Economic Order
Quantity
2.XYZ is a retailer and sells 144,000 units per year.
It purchases from a single supplier. Fixed costs per order are
$897 and carrying cost is $10 per unit per year. In economic order
quantity model, what...

James Sullivan, the firm’s general manager, is approached by a
supplier of #3925 valves offering quantity discounts, ultimately
forcing a ‘Make vs. Buy’ decision: continue in-house
production/sourcing or contract with the supplier in question
(i.e., outsource). Accordingly, he must determine both
the quantity and method of delivery (i.e., either orders received
gradually or orders received all at once) for one
material. And, consequently,
determine if the valves should continue to be made in-house or
out-sourced.
Mike Wazowski develops the following...

The I-75 Carpet Discount Store has an annual demand of 10,000
yards of Super Shag carpet. The annual carrying cost for a yard of
this carpet is $0.75, and the ordering cost is $150. The carpet
manufacturer normally charges the store $8 per yard for the carpet;
however, the manufacturer has offered a discount price of $6.50 per
yard if the store will order 5,000 yards. How much should the store
order, and what will be the total annual inventory...

The I-75 Carpet Discount Store has an annual demand of 10,000
yards of Super Shag carpet. The annual carrying cost for a yard of
this carpet is $0.75, and the ordering cost is $150. The carpet
manufacturer normally charges the store $8 per yard for the carpet;
however, the manufacturer has offered a discount price of $6.50 per
yard if the store will order 5,000 yards. How much should the store
order, and what will be the total annual inventory...

A local discount store stocks toy race cars. Recently, the store
has received the following discount schedule for these
cars. The annual demand for race case is 5000 cars, the
ordering costs are $49 per order and the annual carrying costs are
20% percent of the unit price.
a.) Indicate the order quantity, price and total cost that will
minimize total inventory costs.
Quantity
Price
1-699 $5.00
700-1999 $4.80
2000
+ $4.75
b.) Assume that the discount store
would like to have a...

Q2. A company purchases 25,000 litres of material each
year from a single supplier. At the moment, the company obtains the
material in batch sizes of 800litres. The materials costs $16 per
litre. The cost of ordering new batch is $32 and the cost of
holding one litre in stock is $4 a year plus an interest cost equal
to 15% of the purchase price of the material.
Calculate:
a. The Economic Order Quantity
b. Total ordering cost
c. Total...

Optimal Inventory Policy
The inventory manager has typically ordered a quantity of 800
each time an order is needed for one of their popular tires to take
advantage of the discount provided by the supplier and save the
company money. The following discount schedule has just been
received reflecting recent changes in some of the discount
percentages. The manager still maintains that an order quantity of
800 will save the company the most money because of the quantity
discount.
Order...

XYZ is a retailer and sells 198,000 units per year. It purchases
from a single supplier. Fixed costs per order are $895 and carrying
cost is $12 per unit. How many units should XYZ purchase per order?
That is, what is the Economic Order Quantity?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 9 minutes ago

asked 9 minutes ago

asked 14 minutes ago

asked 33 minutes ago

asked 34 minutes ago

asked 34 minutes ago

asked 44 minutes ago

asked 59 minutes ago

asked 59 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 1 hour ago