Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hallmark Greetings has experienced a relatively constant demand of 2,000 cards per year for one particular type of greeting cards (GC1) and 1,200 cards for

Hallmark Greetings has experienced a relatively constant demand of 2,000 cards per year for one particular type of greeting cards (GC1) and 1,200 cards for another type of greeting cards (GC2). Hallmark orders each type of cards from a separate regional distribution that supplies cards to Hallmark at a rate of 160 units per week. Each distributor charges a fixed transportation cost of $200 per order. Hallmark estimated at $2 the cost of holding one unit one year in the warehouse. Furthermore, Hallmark quantified the missed return from holding inventory at 20% per year. The unit-costs of GC1 and GC2 are $5 and $7 respectively. Assume there are 50 weeks per year. Hallmark greetings was advised by an AB consultant. The consultant suggested that Hallmark works with only one distributor who will be supplying both cards at the same unit costs as before ($5 for GC1 and $7 for GC2). The shipment rate (160units/week) remains the same as well the transportation cost of $200 per order. However, each order will consist of a mix of both cards. 1- What is the optimal total ordering quantity of cards in this case? Hint. Find first the average unit holding cost. 2- What quantity of each type of cards will Hallmark be ordering?

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

Step: 3

blur-text-image

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

Im A Auditor If You Dont Want A Sarcastic Answer Dont Ask A Stupid Question

Authors: Tim Hansen

1st Edition

B088Y3ZP2D, 979-8618443227

More Books

Students also viewed these Accounting questions

Question

Would you want to work at W.L. Gore and Associates? Why or why not?

Answered: 1 week ago