The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the correct ordering policy (give optimal order quantity), given the following price breaks for purchasing the item? What price should the firm pay per unit? What is the total annual cost at the optimal behavior? Quantity: Price: 1-9 $2.95 per unit 10-999 $2.50 per unit 1,000-4,999 $2.30 per unit 5,000 or more $1.85 per unit

The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the correct ordering policy (give optimal order quantity), given the following price breaks for purchasing the item? What price should the firm pay per unit? What is the total annual cost at the optimal behavior? Quantity: Price: 1-9 $2.95 per unit 10-999 $2.50 per unit 1,000-4,999 $2.30 per unit 5,000 or more $1.85 per unit

Name: The annual demand for an item is 10,000 units. The cost to process an
Uploaded: 2024-03-20T06:57:05.000Z
Channel: Bartleby
Description: The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the correct ordering policy (give optimal order quantity), given the following price breaks for purc

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

See similar textbooks

Similar questions

A manufacturer of exercise equipment purchases the pulley section of the equipment from a supplier who lists these prices: Less than 1000           $5.00 each 1000 to 3999               $4.95 each                   4000 to 5999               $4.90 each 6000 or more               $4.85 each Ordering costs are $50, annual carrying costs per unit are 40 percent of purchase cost, and annual usage is 4900 pulleys. Determine the order quantity that will minimize total cost.
The annual demand, ordering cost, and the annual inventory carrying cost rate for a certain item are 600 units, Quantity 1 to 49 50 to 249 250 and up Price $5.00/unit $4.50/unit $ 4.10/unit $20/order and 30% of item price, respectively. (a) Assume the discounts applied to all the units in the order, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost.    (b) Assume the discounts applied to the units are incremental, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost.
Economics A hospital uses 18,000 of syringes each year. Holding cost per box is $0.60 ordering costs are $96 per order. The hospital buyer would like to take advantage of quantity discounts offered by the supplier. The cost structure is as follows:                                Number of boxes                          Price per box                                     1,000 to 1,999                              $1.25                                     2,000 to 4,999                              $1.20                                     5,000 to 9,999                              $1.15                                     10,000 or more                             $1.10 Use this data to answer the following: In what level is the EOQ What is the optimal order quantity? What is total cost at each level after the EOQ level?
Alina Limited is a manufacturer of widgets orders components for use in manufacturing. The estimated demand for the components during the coming year is 15,000. Order costs are $100 per order; carrying costs are $12 per component. Using the economic order quantity model What is Alina Ltd’s optimum order quantity? If the supplier guarantees a three (3) day delivery on any order that is placed, What is the re-order point?
Demand for an item is constant at 40 units a week, and the economic order quantity is calculated to be 100 units. What is the reorder level if lead time is constant at 4 weeks. What is the effect of add some margin of safety and raising the reorder level by ten units? What happens if the lead time (a) falls to 2 weeks or (b) raises to 6 weeks?
The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If the order size was 1,000 kilograms of resin, what would be the average inventory level?
The annual demand, ordering cost, and the inventory carrying cost rate for a certain item are D = 600 units, S= $20/order and I = 30% of item price. Price is established by the following quantity discount schedule. What should the order quantity be in order to minimize the total annual cost?
A manufacturer procures a subassembly from a supplier. The annual demand is 165,000 units, the cost per unit is $5, the inventory-carrying charge is 13 percent, and the order cost is $220. For orders between 10,000 but less than 25,000, a six percent discount is applied, and for orders exceeding 25,000, an eight percent discount is applied. What is the optimal order quantity? Use the Quantity Discount Excel template to find your answer.
The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is their optimal order quantity, total cost using the optimal order quantity, and What is the difference in the total cost if they order at their optimal order quantity compared to their current policy?
A company targets a 97% service level for a product with independent weekly demand that is normally distributed with a mean of 50 and a standard deviation of 10. They use a continuous review policy and order from a supplier with a lead time of 3 weeks. What should their reorder point be? PLEASE SHOW CALCULATIONS/EXCEL WITH FORMULAS
52 Demand for an item is 3,800 units per year. Each order placed costs $15; the annual cost to carry items in inventory is $10 each. In what quantities should the item be ordered? Note: Round your answer to the nearest whole number.
The annual demand, ordering cost, and the inventory carrying cost rate for a certain item are D = 10,000 units, S= $75/order and I = 20% of item price. Price is established by the following quantity discount schedule. What should the order quantity be in order to minimize the total annual cost? Please answer in excel format