15.17. A wholesaler encounters a constant demand of 200 cases of one brand and box size of...
Question:
15.17. A wholesaler encounters a constant demand of 200 cases of one brand and box size of soap flakes per week from its retail accounts. The retailer obtains the soap flakes from the manufacturer at $10 per case after paying the transportation costs. The average cost of each order placed is $5, and the retailer computes the inventory carrying charges as 20 percent of the average inventory value on hand over a one-year period.
a. Compute the EOQ for this product.
b. Assuming a constant lead time of 5 days for this product, what is the minimum reorder point that will allow the wholesaler to provide 100 percent customer service? Assume five operating days per week.
c. Determine the wholesaler’s total cost per year for this product.
d. The manufacturer offers the wholesaler a quantity discount of $1 per case for purchasing in quantities of 400 cases or more. Should the wholesaler take advantage of this quantity discount?
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