Question

JUST PART TWO PLEASE!

1. Videoworld is a discount store that sells color televisions. The monthly demand for color television sets is 100. The cost per order from the manufacturer is $600. The carrying cost is $64 per set each year. Assume a year has 360 working days. Determine the following values rounding to the nearest integer (answer them using only numbers without any sign such as the dollar sign, comma, ...):

Q1. The optimal quantity per order:

Q2. The minimum total annual inventory costs:

Q3. The optimal number of orders per year:

Q4. The optimal time between orders (in working days):

2. If the store had an inventory policy that allows shortages with the shortage cost per set estimated at $80, determine the following values:

Q5. The optimal quantity per order when the store allows shortages:

Q6. The optimal shortage level when the store allows shortages:

Q7. The optimal number of orders per year when the store allows shortages:

Q8. The optimal time between orders (in working days) when the store allows shortages:

* Recommend calculating all the steps in the questions as accurately as possible by using computer software (e.g., excel) Then, input your answers as rounded numbers.

JUST PART TWO PLEASE!

Answer 1

2.

Q5. The optimal quantity per order when the store allows shortages = EOQ with shortages
EOQ = Sqrt(((2*D*Co)/Ch)*((Ch +Cs)/Cs)) where,
D = Annual demand = 100*12 = 1200
Co = ordering cost per order = 600
Ch = holding cost per unit per year = 64
Cs = Shortage cost per unit = 80
EOQ = SQRT(((2*1200*600)/64)*((64+80)/80)) = Sqrt(32990.21563) = 201.246118 = 201 (Rounding to nearest whole number)

Q6. The optimal shortage level when the store allows shortages:

EOQ calculated in shortage model*(Ch/(Ch+Cs)) = 201.246118*(64/(64+80)) = 89.44271911 = 89 (Rounding to nearest whole number)

Q7. The optimal number of orders per year when the store allows shortages:

Annual demand/EOQ = 1200/201.246118 = 5.962847939 = 6 (Rounding to nearest whole number)

Q8. The optimal time between orders (in working days) when the store allows shortages:

number of working days/optimal number of orders per year = 360/5.962847939 = 60.3738354 = 60 days (Rounding to nearest whole number)