Evana Blanca owns a construction firm that builds beautiful concrete walls with reinforced steel. Her holding costs
Question:
Evana Blanca owns a construction firm that builds beautiful concrete walls with reinforced steel. Her holding costs are 25% per year.
a. Evana is charged $400 per delivery of steel rebar. Each rebar costs $200. She needs 150 rebars per week. How many rebars should she purchase from the supplier with each order?
b. Evana receives deliveries of 6000 cinder blocks at a time. There is a fixed cost of $300 per cinder block delivery. She needs 500 cinder blocks per day. Each cinder block costs $2, so she incurs holding cost of $0.5 to hold a cinder block in inventory for one year (i.e., 25% of $2). What is Evana’s total ordering and holding costs ($) per cinder block?
c. Evana is offered a great deal on cinder blocks. If she were to order 36,000 blocks at a time, she would receive a 15 percent discount. Say she decides to switch to purchasing 36,000 cinder blocks with each order so that she can take advantage of the deal. What would be her average inventory holding cost ($) per day? Do not include ordering or purchasing costs.
Step by Step Answer:
Operations Management
ISBN: 9781260547610
2nd International Edition
Authors: Gerard Cachon, Christian Terwiesch