Question

In: Operations Management

You have a daily demand for business cards of 5 units, and you are ordering your...

You have a daily demand for business cards of 5 units, and you are ordering your business cards from Business Card Kings, who charges $2 per card and $55 per order. For the calculation of your holding cost you think that an annual interest rate of 30% is reasonable. Suppose that you will use EOQ model. Note: Throughout this problem, you are required to round all solutions (intermediary results and the final answers) to integers.

  1. Calculate the economic order quantity (i.e., EOQ) per order.

Now suppose that Business Card Kings provides a quantity discount: if you order less than 400 (including 400), it is $2 per card; but if you order more than 400, it is $1.25 per card.

  1. Given this quantity discount scheme, calculate the optimal order quantity and the minimal cost (including holding, setup, and purchase costs).

Now suppose that the order delivery lead-time from Business Card Kings is two weeks.

  1. Determine the re-order point based on the on-hand level of inventory of your business cards.

Solutions

Expert Solution

Economic Order Quantity is the number of unit that is added to the inventory which minimize the total inventory cost. It maintain a balance between ordering costs and carrying costs.

keosha answered 1 hour ago
< Previous

Related Solutions

A product has a daily demand of 26 units per day. Ordering costs are $60 per...
A product has a daily demand of 26 units per day. Ordering costs are $60 per order. The annual carrying costs are measured at 20% of item value. Your supplier has offered you three item cost/price and quantity scenarios (1) you pay $150 per unit if your order quantity is 199 units or less, (2) you pay $121 per unit if your order quantity is between 200 and 4999 units, and (3) you pay $114 per unit if your order...
Daily demand is normally distributed with mean 22 units and SD=6. Ordering cost is $21/order, carrying...
Daily demand is normally distributed with mean 22 units and SD=6. Ordering cost is $21/order, carrying cost is $2.5 per unit per year. The item is used 365 days a year. Order lead time is 4 days. The order point should have a 99% target service level. Find: -avg inventory level -avg number of orders/yr -avg number of stockouts/yr -avg time (years) between stockouts Policy I is the (Q,R) policy determined above. Policy II: Increase the order quantity by 10...
For an EOQ ordering quantity of 750 units, an ordering cost of $5 per order, a...
For an EOQ ordering quantity of 750 units, an ordering cost of $5 per order, a holding cost of $10 per unit per year, and an annual demand of 900 units, what is the annual total cost for this value of Q?
Daily demand for a product is 100 units, with a standard deviation of 35 units. The...
Daily demand for a product is 100 units, with a standard deviation of 35 units. The review period is 10 days and the lead time is 5 days. At the time of review there are 40 units in stock. If 95 percent service probability is desired, how many units should be ordered? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final...
Daily demand for a product is 90 units, with a standard deviation of 20 units. The...
Daily demand for a product is 90 units, with a standard deviation of 20 units. The review period is 10 days and the lead time is 8 days. At the time of review there are 70 units in stock. If 99 percent service probability is desired, how many units should be ordered? (Use Excel's NORMSINV() function to find the correct critical value for the given ?-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final...
The annual demand for a certain product sold in a department store is 1,000 units. Ordering...
The annual demand for a certain product sold in a department store is 1,000 units. Ordering cost per order is $50, holding rate is 40%, and unit cost is $200. The department store currently is ordering every two months, but now is offered the following quantity discount scheme: For an order of up to 99 units no discount. For an order up to 699 units-a discount of 25%, and for a larger order -a discount of 30%. What is the...
The annual demand for a certain product sold in a department store is 1,000 units. Ordering...
The annual demand for a certain product sold in a department store is 1,000 units. Ordering cost per order is $50, holding rate is 40%, and unit cost is $200. The department store currently is ordering every two months, but now is offered the following quantity discount scheme: For an order of up to 99 units no discount. For an order up to 699 units-a discount of 25%, and for a larger order -a discount of 30%. What is the...
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying...
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying interest is 20% of the purchase price per year. Purchase prices are as follows as proposed by the vendor/supplier; where the value of unit cost=10 without any discount? Discount 0% 000≤Q<300    Discount 2% 300≤Q<450 Discount 3% 450≤Q
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying...
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying interest is 20% of the purchase price per year. Purchase prices are as follows as proposed by the vendor/supplier; where the value of unit cost=10 without any discount? Discount 0% 000≤Q<300    Discount 2% 300≤Q<450 Discount 3% 450≤Q a) for inventory model with no discount====================================================================== a1) The economic order quantity = [EOQ] units a2) The total ordering costs = [TOC] $ a3) The total...
You have agreed to sell the business to your younger sister at the end of (5)...
You have agreed to sell the business to your younger sister at the end of (5) years for $110k once she begins college.  Sketch a “Conceptual” Cash Flow Diagram and assume return on investment equivalent to 6% APR (nominal) with monthly compounding (i.e., 0.5%/month).   What is the minimum monthly income that yields this ROI?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT