*Please show Calculations and record answers

You have a contract to make a small wooden souvenir for sale at the Gift Shop of the local Visitor's Center.The items are small/lightweight so primary cost of shipping is the fixed cost of a trip across town.

Other relevant data for the Gift Shop are:

- Quarterly Demand (units) =2500

- Ordering (shipping) cost per order (gas for round trip drive in your pickup) =10

- Holding cost per unit per month (simply cost of storing in your basement) =0.05

Scenario A: Gift Shop doesn't care when deliveries occur

Q1: What inventory model would you use to decide how many wooden souvenirs to deliver to the Gift Ship on each trip? Justify your answer.

Q2: What is your Optimum Delivery Strategy and Annual Cost?

Delivery Strategy:

Optimum Quantity:

Holding Cost:

Ordering Cost:

Total Cost:

Q3: What are some of the drawbacks of the model you are for this application, and how would you qualitatively adjust this quantity in practice?

Scenario B: Gift Shop requires vendors to make deliveries once a month

Q4: How does this impact your cost, and would you accept these delivery terms?

Optimum Quantity:

Holding Cost:

Ordering Cost:

Total Cost:

Accept terms/Why:

Scenario C: Gift Shop requires vendors to make deliveries Just-in-Time (JIT), i.e. once a week

Q5: How does this impact your cost, and would you accept these delivery terms?

Optimum Quantity:

Holding Cost:

Ordering Cost:

Total Cost:

Accept terms/Why:

Pros/Cons of JIT?