1)Dynamic Sound Systems manufactures and sells sound systems for both home and auto. All parts of the sound systems, with the exception of DVD players, are produced in the Rochester, NY, plant. DVD players used in the assembly of Dynamic systems are purchased from Morris Electronics of Concord, NH. Dynamics purchasing agent Mary Kim submits a purchase requisition for DVD players once every 4 weeks. The companys annual requirements total 5,000 units. (20 per working day), and the cost per unit is $60. Dynamic does not want to purchase in greater quantities because Morris Electronics does not offer quantity discounts. Because Morris promises delivery within 1 week following receipt of a purchase requisition, rarely is there a shortage of DVD players. Total time between date of order and date of receipt is 5 days. Associated with the purchase of each shipment are procurement costs. These costs, which amount to $20 per order, include the costs of preparing the requisition, inspecting, and storing the delivered goods, updating inventory records, and issuing a voucher and a check for payment. In addition to procurement costs, Dynamic incurs inventory carrying costs that include insurance, storage, handling, taxes, and so forth. These costs equal $6 per unit per year. Beginning in August of this year, Dynamics management will embark on a companywide cost-control program in an attempt to improve its profits. One area to be closely scrutinized for possible cast savings is inventory procurement.

a) What is the purchase cost or PD if Dynamic were to buy 5000 units at one time? (2 points)

b) Compute the number of orders per year the number and the average order size (how many units per order)? (4 points)

c) Compute the order cost. (3 points)

d) Compute the total carrying/holding costs based on your answer from question b. (5 points)

e) Determine the total inventory costs assuming the company is already is holding 5000 units at $60 per unit cost (PD). (5 points)

f) Determine the EOQ. (4 points)

g) Determine the total inventory costs using the EOQ. Again assume that the company is already holding 5000 units at $60 per unit. (5 points)

h) Compute the savings the company will realize between answers from questions e and g. (2points)

i) Determine ROP (3 points)

j) Should order costs be considered a linear function of the number of orders? (2 points)