1. Sony Electronics hires Mr. Mark Gunther of Brockhart & Kaitlin in order to manage inventory operations. Sony has a supplier that produces electronic circuit boards for its TV sets. Sony currently pays $300 for each circuit boards, and consumes an estimated 30,000 boards in a year. It costs Sony $700 to place an order to its supplier. The unit inventory holding cost is estimated to be equal to 50% of the purchasing price. Determine the economic order quantity for Sonys outsourcing alternative.

2. Given the economic order quantity that you found for Question 1, calculate the associated annual total cost (including ordering, inventory holding and purchasing costs) for Sonys outsourcing alternative.

3. Sonys engineers inform Mark Gunther that a new facility soon to be fully operational within the supply chain of the company can actually produce the same circuit boards (of Problem 1). The unit manufacturing cost at this plant is estimated to be equal to $295 per board. The setup cost is equal to $700. The plant is scheduled to work for 250 days and has a daily demand of 120 boards (corresponding to an annual demand of 30,000) while having the capability of producing at a rate of 240 boards/day. As in the outsourcing alternative of Problem 1, the unit inventory holding cost is 50% of the unit manufacturing cost. Compute the economic production quantity.

4. Given the economic production quantity that you calculated for Question 3, find the associated annual total cost (including setup, inventory holding and manufacturing costs) for Sonys manufacturing alternative.

5. Given your answers for question 2 and question 4, determine whether Sony should choose outsourcing or manufacturing alternative. A) Sony should choose manufacturing alternative B) Sony should choose outsourcing alternative.

6. The supplier Sony Electronics uses (in Problem 1 and 2) produces a new and updated price list based on increased order quantities. The following list shows the new prices: Using the same ordering cost information available in Problem 1, what is the optimal order quantity for Sony?

7. Using the same ordering cost information available in Problem 1, and the optimal order quantity for Sony in Problem 6, calculate the associated annual total cost for the outsourcing alternative with price discounts.