Question
A store sells crystal figurines. The store buys the figurines from a manufacturer for $10 per unit. It sends orders electronically to the manufacturer, costing
A store sells crystal figurines. The store buys the figurines from a manufacturer for $10 per unit. It sends orders electronically to the manufacturer, costing $20 per order, and it experiences an average lead time of eight days for each order to arrive from the manufacturer. Its inventory carrying cost is 20 percent. The average daily demand for the figurines is two units per day. Store is open for business 250 days a year. The supplier decides to offer a volume discount. It will sell the crystal figurines at $8 per unit for orders of 250 units or more. Answer the following questions:
a. How many units should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time.
b. How many orders will it place in a year?
c. What is the average inventory?
d. What is the annual ordering cost?
e. What is the annual inventory carrying cost?
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