Question

Problem 1 - Better Life Pharmacies

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Part 1: Optimal order quantity

Joshua is running a pharmacy in Nigeria (where Naira is the local currency). His recent experience in the MicroMasters course motivated him to rethink how to reorder pharmaceuticals to replenish inventory. He recalls from Module 4, Unit 1, Video 5, that he should consider the purchase cost, the order cost, and the holding cost. In the past, Joshua rigorously tracked these cost items. For Ibuprofen he knows that:

unit cost: ? = 112 Naira/pack

demand: ? = 960 packs/year

ordering cost: ? = 1600 Naira/order

holding cost: ?∗? = 43 Naira/pack*year

How many packs of Ibuprofen should Joshua order to minimize the total cost?

Round your answer to the nearest integer.

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Part 2: Consolidating orders

Joshua runs a second pharmacy on the other side of town. He has been ordering for each location individually from a wholesaler. He realizes that he can save some money by consolidating the two orders into one single order. The costs per pack for both pharmacies are exactly the same (use ?, ? and ?∗? values from Part 1). The annual demand for Ibuprofen in the second pharmacy is 820 packs.

What is the consolidated optimal order quantity (in packs of Ibuprofen)?

Round your answer to the nearest integer.

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Part 3: Savings from consolidation

If Joshua places one consolidated order (as in Part 2) instead of placing two separate orders, how much money will he save?

Round your answer to one decimal place (e.g. if the result is 1.534 put in as an answer 1.5).

Answer 1