Case Problem DIAMANT FOODS COMPANY item is relatively expensive, so Diamant Foods produces it only for its eastern market, encompassing urban areas such as New York, Atlanta, Philadelphia, and Boston. The item Diamant Foods Company produces a variety of food is not sold in grocery or discount stores but mainly in spe- products, including a line of candies. One of its most popular candy items is Divine Diamonds, a bag of a dozen individually wrapped diamond-shaped candies made primarily from a blend of dark and milk chocolates, macadamia nuts, and a blend of heavy cream fillings. The cialty shops and specialty groceries, candy stores, and de- partment stores. Diamant Foods supplies the candy to a single food distributor, which has several warehouses on the East Coast. The candy is shipped in cases of 60 bags of the candy per case. Diamonds sell well, despite the fact that they are expensive, at $9.85 per bag (wholesale). Dia- mant uses high-quality, fresh ingredients and does not store large stocks of the candy in inventory for very long periods of time. Diamant's distributor believes that demand for the candy follows a seasonal pattern. It has collected demand data (i.e., cases sold) for Diamonds from its warehouses and the stores it supplies for the past 3 years, as follows: CASE PROBLEM 793 milk chocolate, macadamia nuts, and a special heavy cream filling. Except for its unique shape, a Diamond is al- most like a chocolate truffle. Each Diamond weighs 1.2 ounces and requires 0.70 ounce of blended chocolates, 0.50 ounce of macadamia nuts, and 0.40 ounce of filling to produce (including spillage and waste). Diamant Foods or- ders chocolate, nuts, and filling from its suppliers by the pound. The annual ordering cost is $5,700 for chocolate, and the annual carrying cost is $0.45 per pound. The order- ing cost for macadamia nuts is $6,300, and the annual car- rying cost is $0.63 per pound. The ordering cost for filling is $4,500, and the annual carrying cost is $0.55 per pound. Each of the suppliers offers the candy manufacturer a quantity discount price schedule for the ingredients, as follows: Demand (cases) Month Year 1 Year 2 Year 3 January 192 212 228 February 210 223 231 March 205 216 226 April 260 252 293 May 228 235 246 June 172 220 229 July 160 209 217 Chocolate Price Quantity (lb.) Macadamia Nuts Price Quantity (lb.) Filling Price Quantity (lb.) August 147 231 226 September 256 263 302 $3.05 2.90 October 342 370 411 November 251 260 279 2.75 December 273 277 293 0-50.000 50,001-100,000 100,001-150,000 2.60 150,001+ $6.50 6.25 5.95 0-30,000 30,001-70,000 70,001+ $1.50 1.35 1.25 0-40,000 40,001-80,000 80,001+ The distributor must hold the candy inventory in cli- mate-controlled warehouses and be careful in handling it. The annual carrying cost is $116 per case. Diamonds must be shipped a long distance from the manufacturer to the dis- tributor, and in order to keep the candy as fresh as possible, trucks must be air-conditioned, shipments must be direct, and shipments are often less than a truckload. As a result, the ordering cost is $4,700. Diamant Foods makes Diamonds from three primary ingredients it orders from different suppliers: dark and Determine the inventory order quantity for Diamant's distributor. Compare the optimal order quantity with a seasonally adjusted forecast for demand. Does the order quantity seem adequate to meet the seasonal demand pat- tern for Diamonds (i.e., is it likely that shortages or ex- cessive inventories will occur)? Can you identify the causes of the seasonal demand pattern for Diamonds? Determine the inventory order quantity for each of the three primary ingredients that Diamant Foods orders from its suppliers.