Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A local supermarket needs your help in determining the optimal ordering policy for a stainless - steel vacuum bottle. The demand for this water bottle

A local supermarket needs your help in determining the optimal ordering policy for a stainless-steel vacuum bottle. The demand for this water bottle is 20 units per day. The store pays a unit cost of $15 per bottle and a fixed ordering cost of $150 per order. The annual unit holding cost of inventory is estimated to be 25% of the unit cost. The store operates 250 days a year.
a. Determine the Economic Order Quantity (EOQ). Compute the time between two orders and the total annual relevant inventory cost (i.e., sum of holding and ordering costs) for stainless-steel vacuum bottle in the EOQ model.
b. Compute the reorder point assuming that the order lead time is 4 workdays.
c. Suppose that supplier requires orders to be placed in multiples of 100 units. What order quantity would you now suggest to the store to meet the supplier's mandate while minimizing total annual costs? What is the increase in the total annual relevant inventory cost due to this requirement compared to your answer in part (a)?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Strategic Management and Competitive Advantage Concepts and Cases

Authors: Jay B. Barney, William Hesterly

5th edition

133129306, 0133127400, 9780133129304, 978-0133127409

More Books

Students also viewed these General Management questions