Case - Low Nail Company After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,200 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: order-processing costs, which were $52 per order without regard to size, and warehousing costs, which were $1.52 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis. Questions 1. Using the EOQ methods cutlined in the chapter, how many kegs of nails should Low order at one time? Compule the corresponding Orders per year, Annual warchousing cost, and the Total inventory-related cost. h. Recommend to Mr. Low what he should do for his Imentory Manegement decision. Be clear to state hy this is in his best interest. 2. Assume all conditions in Question 1 hold, except that Low's supplier now offers a quantity discount in the form of absorbing all or part of Low's order-processing costs. For orders of 750 or more kegs of nails, the supplier will absorb all the order-processing costs; for orders between 250 and 749 kegs, the supplier will absorb half. Use the provided cost table to estimate Low's new EOQ. Should he take the full rebate? Should he take the partial rebate? Should he avoid the rebate? Compare the savings in Total inventory-related costs from #1 to convince Mr. Low of your recommendation. The new EOQ, based on the current situation is: Hint: use the table obove to identify the minimum Total Cost option. Total cost savings [or extra expenses] from #1? Discuss your recommended Order size. Should he take the full rebate? Should he take the partial rebate? Should he avoid the rebate? Compare the savings in Total inventory-related costs from #1 to convince Mr. Low of your recommendation. 3. Temporarily, ignore your work on Question 2. Assume that Low's warehouse offers to rent Low space on the basis of the average number of kegs Low will have in stock, rather than on the maximum number of kegs Low would need room for whenever a new shipment arrived. The storage charge per keg remains the sarne. Does this change the answer to Question 1 ? If so, what is the new answer? Should Mr. Low take the new warehouse offer? What is your new recommendation for EOQ? Compare the savings in Total inventory-related eosts from #1 to convinee Mr. Low of your recommendation. The new EOQ, based on the current situation is: Hint: use the table above to identify the minimum Total Cost option. Total cost savings (or extra expenses] from #1? Should Mr. Low take the new warehouse offer? What is your new recommendation for EOQ? Compare tha savings in Total inventory-ralated costs from #1 to convinee Mr. Law of your Question 4: \begin{tabular}{|c|c|c|c|c|} \hline Orders Per Year & Order Size & Annual Processing Costs (\$) & Annual Warehousine Costs (\$) & Total Annual Inventory Costs (\$) \\ \hline 1 & 2,200 & & & \\ \hline 2 & & & & \\ \hline 3 & & & & \\ \hline 4 & & & & \\ \hline 5 & & & & \\ \hline 6 & & & & \\ \hline 7 & & & & \\ \hline B & & & & \\ \hline 9 & & & & \\ \hline \end{tabular} 4. Take into account the answer to Question 1 and the supplier's new policy outlined in Question 2 and the warehouse's new policy in Question 3. What is your new recommendation for EOQ? Convince Mr. Low to take the supplier rebate, new warchouse offer, both or neither. The new EOQ, based on the current situation is: Hint: use the table above to identify the minimum Total Cast option. Total cost savings lor extra expenses] from #1? What is your new recommendation for EOQ? Convince Mr. Low to take the suppliar rebate, new warehouse affer, both or neither. 6. Taking into account all the factors listed in Questions 1, 2, 3, and 5, calculate Low's EOQ for kegs of nails. Given the new Cost of Capital, should Mr. Low still take the supplier rebate and new warchouse offer? How much do these now save him? Which of these 6 EOQs are correct? What is your final recommendation to Mr. Low? The new EOQ, based on the current situation is: Hint use the toble above to identify the minimum Totol Cost option. Total cost sevings (or extra expenses) from 45 ? Given the new Cost of Capital, should Mr. Low still take the supplier rebate and new warehouse offer? How much do these now save him? Case - Low Nail Company After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,200 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: order-processing costs, which were $52 per order without regard to size, and warehousing costs, which were $1.52 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis. Questions 1. Using the EOQ methods cutlined in the chapter, how many kegs of nails should Low order at one time? Compule the corresponding Orders per year, Annual warchousing cost, and the Total inventory-related cost. h. Recommend to Mr. Low what he should do for his Imentory Manegement decision. Be clear to state hy this is in his best interest. 2. Assume all conditions in Question 1 hold, except that Low's supplier now offers a quantity discount in the form of absorbing all or part of Low's order-processing costs. For orders of 750 or more kegs of nails, the supplier will absorb all the order-processing costs; for orders between 250 and 749 kegs, the supplier will absorb half. Use the provided cost table to estimate Low's new EOQ. Should he take the full rebate? Should he take the partial rebate? Should he avoid the rebate? Compare the savings in Total inventory-related costs from #1 to convince Mr. Low of your recommendation. The new EOQ, based on the current situation is: Hint: use the table obove to identify the minimum Total Cost option. Total cost savings [or extra expenses] from #1? Discuss your recommended Order size. Should he take the full rebate? Should he take the partial rebate? Should he avoid the rebate? Compare the savings in Total inventory-related costs from #1 to convince Mr. Low of your recommendation. 3. Temporarily, ignore your work on Question 2. Assume that Low's warehouse offers to rent Low space on the basis of the average number of kegs Low will have in stock, rather than on the maximum number of kegs Low would need room for whenever a new shipment arrived. The storage charge per keg remains the sarne. Does this change the answer to Question 1 ? If so, what is the new answer? Should Mr. Low take the new warehouse offer? What is your new recommendation for EOQ? Compare the savings in Total inventory-related eosts from #1 to convinee Mr. Low of your recommendation. The new EOQ, based on the current situation is: Hint: use the table above to identify the minimum Total Cost option. Total cost savings (or extra expenses] from #1? Should Mr. Low take the new warehouse offer? What is your new recommendation for EOQ? Compare tha savings in Total inventory-ralated costs from #1 to convinee Mr. Law of your Question 4: \begin{tabular}{|c|c|c|c|c|} \hline Orders Per Year & Order Size & Annual Processing Costs (\$) & Annual Warehousine Costs (\$) & Total Annual Inventory Costs (\$) \\ \hline 1 & 2,200 & & & \\ \hline 2 & & & & \\ \hline 3 & & & & \\ \hline 4 & & & & \\ \hline 5 & & & & \\ \hline 6 & & & & \\ \hline 7 & & & & \\ \hline B & & & & \\ \hline 9 & & & & \\ \hline \end{tabular} 4. Take into account the answer to Question 1 and the supplier's new policy outlined in Question 2 and the warehouse's new policy in Question 3. What is your new recommendation for EOQ? Convince Mr. Low to take the supplier rebate, new warchouse offer, both or neither. The new EOQ, based on the current situation is: Hint: use the table above to identify the minimum Total Cast option. Total cost savings lor extra expenses] from #1? What is your new recommendation for EOQ? Convince Mr. Low to take the suppliar rebate, new warehouse affer, both or neither. 6. Taking into account all the factors listed in Questions 1, 2, 3, and 5, calculate Low's EOQ for kegs of nails. Given the new Cost of Capital, should Mr. Low still take the supplier rebate and new warchouse offer? How much do these now save him? Which of these 6 EOQs are correct? What is your final recommendation to Mr. Low? The new EOQ, based on the current situation is: Hint use the toble above to identify the minimum Totol Cost option. Total cost sevings (or extra expenses) from 45 ? Given the new Cost of Capital, should Mr. Low still take the supplier rebate and new warehouse offer? How much do these now save him