Question
In: Operations Management
A lab is trying to determine how many test kits it should order from its supplier....
A lab is trying to determine how many test kits it should order from its supplier. They use 780 kits per year. The annual holding cost is $3 per kit per year. The ordering cost is $15 per order. The supplier delivers their orders all at one time, but offers a quantity discount. What is the optimum condition (order quantity) and total cost (ordering, holding and item cost)? Draw the Order quantity (Q) verses Total Annual Cost graph with 3 item prices.
| Quantity | Price |
| 1-72 | 60 |
| 73-144 | 56 |
| 145 and more | 53 |
Solutions
Expert Solution
Annual demand =780
Annual holding cost per kit per year =3
Cost per order =15
Optimal order quantity also known as Economic order quantity is given by the formula ,
EOQ=sqrt(2*Annual demand*cost per order/holding cost per unit per year)
=sqrt(2*780*15/3)
=88.317
=88
Number of orders =Annual demand/EOQ=780/88 =8.86 =9 orders per year
Total cost=ordering cost+holding cost+purchasing cost
=No of orders * cost per order+average inventory *inventory holding cost +Annual demand * Purchase price
=9*15+88/2* 3+780*56
=$ 43947
Order quantity versus Total cost graph
Calculations are as shown below :
keosha answered 2 years agoRelated Solutions
A local gift shop is trying to determine how many photos frames to order. The shop...
A local gift shop is trying to determine how many photos frames
to order. The shop feels it will sell approximately 800 photos
frames in the next year at a unit price of R18.00.The wholesale
price that the store pays per photo frame is R12.00. The cost of
carrying one photo frame is estimated at R1.60 per year, while
ordering costs are estimated at 825.00 per batch ordered.
REQUIRED
(a) Explain the meaning of economic order quantity (EOQ) and
reorder...
Lemington’s is trying to determine how many Jean Hudson dresses to order for the spring season....
Lemington’s is trying to determine how many Jean Hudson dresses
to order for the spring season. Demand for the dresses is assumed
to follow a normal distribution with mean 400 and standard
deviation 100. The contract between Jean Hudson and Lemington’s
works as follows. At the beginning of the season, Lemington’s
reserves x units of capacity. xxLemington’s must take delivery for
at least 0.8xdresses and can, if desired, take delivery on up to
xdresses. Each dress sells for $160 and...
Lemington’sis trying to determine how many Jean Hudson dresses to order for the spring season. Demand...
Lemington’sis trying to determine how many Jean Hudson dresses
to order for the spring season. Demand for the dresses is assumed
to follow a normal distribution with mean of 400 and standard
deviation of 100. The contract between Jean Hudson and Lemington’s
works as follows. At the beginning of the season, Lemington’s
reserves x units of capacity. Lemington’s must take delivery for at
least 0.8x dresses and can, if desired, take delivery on up to x
dresses. Each dress sells...
Problem #32) Diamond Jewelers is trying to determine how to advertise in order to maximize their...
Problem #32) Diamond Jewelers is trying to determine how to
advertise in order to maximize their exposure. Their weekly
advertising budget is $10,000. They are considering three possible
media: TV, newspaper, and radio. Information regarding cost and
exposure is given in the table below:
Medium
audience reached per ad
cost per ad ($)
maximum ads per week
TV (T)
7,000
800
10
Newspaper (N)
8,500
1000
7
Radio (R)
3,000
400
20
Based on problem #32, which of the following...
The supervisor of a manufacturing plant is trying to determine how many of two parts, Part...
The supervisor of a manufacturing plant is trying to determine
how many of two parts, Part X and Part Y, are to be produced per
day. Each part must be processed in three sections of the plant.
The time required for the production along with the profit
contribution for each part are given in the following table. Time
required (Minutes/Unit) Section 1 Section 2 Section 3 Profit/Unit
Part X 50 30 18 $2 Part Y 80 45 22 $3 Available...
The supervisor of a manufacturing plant is trying to determine how many of two parts, Part...
The supervisor of a manufacturing plant is trying to determine
how many of two parts, Part X and Part Y, are to be produced per
day. Each part must be processed in three
sections of the plant. The time required for the
production along with the profit contribution for each part are
given in the following table.
Time required (Minutes/Unit)
Section 1
Section 2
Section 3
Profit/Unit
Part X
50
30
18
$2
Part Y
80
45
22
$3
Available time (minutes)...
The WT Company needs to order a part from a supplier. The supplier has the following...
The WT Company needs to order a part from a supplier. The
supplier has the following price schedule for the part. The parts
cost $300 each for orders of 500 or fewer units; for orders between
500 and 1,000 units, the first 500 cost $300 each and the remaining
amount cost $290 each; for quantities of 1,000 and over the first
500 cost $300 each, the next 500 cost $290 each, and the remaining
amount cost $280 each. The accounting...
You are running a screening lab in a hospital and are trying to decide which test...
You are running a screening lab in a hospital and are trying to
decide which test you should bulk order, API 20E, or EnteroPluri.
Choose one and write a justification of why you prefer that one
over the other.
136. Schrank Company is trying to decide how many units of merchandise to order each month....
136. Schrank Company is trying to decide how many units of
merchandise to order each month. The company's policy is to have
25% of the next month's sales in inventory at the end of each
month. Projected sales for August, September, and October are
44,000 units, 34,000 units, and 54,000 units, respectively. How
many units must be purchased in September?
136B. The sales budget for Modesto Corp. shows that 21,100 units
of Product A and 23,100 units of Product B...
Hartman Company is trying to determine how much of each of two products should be produced...
Hartman Company is trying to determine how much of each of two
products should be produced over the coming planning period. The
only serious constraints involve labor availability in three
departments. Shown below is information concerning labor
availability, labor utilization, overtime, and product
profitability.
Product 1
Product 2
Regular Hours Available
Overtime Hours Available
Cost of Overtime per Hour
Profit per Unit
27
19
Dept A hours/Unit
1
0.35
94
17
$15
Dept B hours/Unit
0.3
0.2
46
11
$17...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
- #Python: A palindrome is a sequence of characters that reads the same backwards as forwards. For...
- Explain an example in which a variable has two different addresses at different places in a...
- Hadley, a thirty-five-year-old physician, has worked at Princeton Plainsboro Hospital for six years. She recently received...
ADVERTISEMENT