Question
11.a) Hi Tech Corporation (HTC) expects to order 295,000 memory chips for inventory during the coming year, and it will use this inventory at a
11.a) Hi Tech Corporation (HTC) expects to order 295,000 memory chips for inventory during the coming year, and it will use this inventory at a constant rate.Fixed ordering costs are $325 per order; the purchase price per chip is $32; and the firm's inventory carrying costs is equal to 18 percent of the purchase price.What is the economic ordering quantity for chips?
11.b) Using the data from problem 11.a, HTC is able to negotiate a reduction in the fixed ordering costs to $250.00 per order, but HTC decides to carry a safety stock of 28 days of memory chip sales.With the reduced fixed ordering cost and the increased average inventory due to the safety stock carried, what is the additional total inventory costs due to the decision to balance out uncertainty by carrying the specified safety stock?
11.c) HTC purchases 100,000 office chairs every year.Ordering costs are $95.00 per order and carrying costs are $3.75 per chair.What is HTC's total inventory cost per year, including both carrying costs and ordering costs, if HTC orders the HTC of office chairs?
11.d) Using the data from problem 11.c, HTC is able to negotiate a reduction in the carrying costs to $3.50 per chair, but HTC's chair supplier offers a quantity discount of $0.22 per chair if HTC orders 5,000 chairs at a time rather than the EOQ.Determine the before-tax benefit or loss of accepting the quantity discount.(Assume the carrying cost remains at $3.50 per chair whether or not the discount is taken.)
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