Q* is the EOQ Book equations R annual demand hholding cost per unit per year v...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66479bcce88a5_97266479bccb5eb6.jpg)
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66479bcd6e7e9_97366479bcd4d6b8.jpg)
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66479bcdf36cf_97366479bcdbca4d.jpg)
Transcribed Image Text:
Q* is the EOQ Book equations R annual demand hholding cost per unit per year v ~ purchasing cost per unit K~ ordering cost per order . Q quantity ordered at a time It follows that: Purchasing cost per year= v x R Holding cost per year= h x Q/2 Ordering cost per year= K x R/Q Q* = 2xKxR h Lecture Notes equations let D be the avg. demand per unit time let C be the per-unit cost (to you) of inventory let h be the inventory holding rate (watch time units) let H be hC let S be the ordering cost (incl. shipping) We write total cost as follows Total Cost Ordering Costs (or setup cost) + Holding Costs TC = Number of Orders Placed a Year * S + Average Inventory * hC Annual Demand (D) * S + TC = Q (quantity ordered each time) *nc then take the derivative wrt Q and set it equal to zero to find the optimum order quantity (EOQ): EOQ= 2.D.S H Question 2. (11 points) Part A. A beer distributor sells 500 cases of regular 12-oz. Budweiser per week for 50 weeks each year - assume that there are 50 weeks in a year - from its warehouse in Central Austin. The distributor currently orders a one-week supply of 500 cases at the beginning of each week from a supplier at a purchase cost of $8 per case. They also pay a fixed cost of $100 for each delivery. The beer distributor estimates its annual per-case inventory holding cost (cost of capital, insurance, etc.) at 25 percent of purchase cost. (a) What is the distributor's annual ordering plus holding costs (in $)? (1) (b) What is the distributor's ordering plus holding costs (in $) per case of beer? Round up or down to two significant figures after the decimal point. (c) How long (in weeks) on average does a case of beer sit on the distributor's shelf before it is sold? Do not round up or down. (1) (1) (d) What order size would you recommend to the beer distributor? Choose the nearest integer. (1) (e) For the distributor, what is the minimum possible annual cost (in $) of ordering and holding? Choose the nearest integer. (1) (f) For the distributor, what is the minimum possible cost (in $) of ordering and holding per case of beer? Round up or down to two significant figures after the decimal point. (1) (g) Consider the reduction in the cost of ordering and holding per case of beer if the distributor switches to the EOQ policy. Is it More or Less than 35%? (1) Part B. A consultant recommends that the same beer distributor replace the Central Austin warehouse with two smaller and identical warehouses - one in north Austin and the other in South Austin. The motivation is to be closer to customers. The current demand of 500 cases per week would be split evenly between the two smaller warehouses and each new warehouse would operate independently. Each new warehouse would face the same costs as the current warehouse: purchase cost of $8 per case of beer, fixed cost of $100 for each delivery from the supplier, and annual per-case inventory holding cost (cost of capital, insurance, etc.) at 25 percent of purchase cost. Furthermore, assume that both new warehouses would use the EOQ policy. Suppose that the distributor follows the consultant's recommendation and ends up operating two warehouses. (h) What would be the EOQ (in cases) for the North Austin warehouse? Choose the nearest integer. (1) (i) What would be the (average) number of deliveries to the South Austin warehouse by the supplier every year? Choose the nearest integer. (1) (j) How much (in $) on average would the distributor have to pay per year for deliveries by the supplier? Choose the nearest hundred (= a multiple of 100). (k) For the distributor, what would be the annual ordering plus holding costs ($)? Choose the nearest integer. (1) (1) Q* is the EOQ Book equations R annual demand hholding cost per unit per year v ~ purchasing cost per unit K~ ordering cost per order . Q quantity ordered at a time It follows that: Purchasing cost per year= v x R Holding cost per year= h x Q/2 Ordering cost per year= K x R/Q Q* = 2xKxR h Lecture Notes equations let D be the avg. demand per unit time let C be the per-unit cost (to you) of inventory let h be the inventory holding rate (watch time units) let H be hC let S be the ordering cost (incl. shipping) We write total cost as follows Total Cost Ordering Costs (or setup cost) + Holding Costs TC = Number of Orders Placed a Year * S + Average Inventory * hC Annual Demand (D) * S + TC = Q (quantity ordered each time) *nc then take the derivative wrt Q and set it equal to zero to find the optimum order quantity (EOQ): EOQ= 2.D.S H Question 2. (11 points) Part A. A beer distributor sells 500 cases of regular 12-oz. Budweiser per week for 50 weeks each year - assume that there are 50 weeks in a year - from its warehouse in Central Austin. The distributor currently orders a one-week supply of 500 cases at the beginning of each week from a supplier at a purchase cost of $8 per case. They also pay a fixed cost of $100 for each delivery. The beer distributor estimates its annual per-case inventory holding cost (cost of capital, insurance, etc.) at 25 percent of purchase cost. (a) What is the distributor's annual ordering plus holding costs (in $)? (1) (b) What is the distributor's ordering plus holding costs (in $) per case of beer? Round up or down to two significant figures after the decimal point. (c) How long (in weeks) on average does a case of beer sit on the distributor's shelf before it is sold? Do not round up or down. (1) (1) (d) What order size would you recommend to the beer distributor? Choose the nearest integer. (1) (e) For the distributor, what is the minimum possible annual cost (in $) of ordering and holding? Choose the nearest integer. (1) (f) For the distributor, what is the minimum possible cost (in $) of ordering and holding per case of beer? Round up or down to two significant figures after the decimal point. (1) (g) Consider the reduction in the cost of ordering and holding per case of beer if the distributor switches to the EOQ policy. Is it More or Less than 35%? (1) Part B. A consultant recommends that the same beer distributor replace the Central Austin warehouse with two smaller and identical warehouses - one in north Austin and the other in South Austin. The motivation is to be closer to customers. The current demand of 500 cases per week would be split evenly between the two smaller warehouses and each new warehouse would operate independently. Each new warehouse would face the same costs as the current warehouse: purchase cost of $8 per case of beer, fixed cost of $100 for each delivery from the supplier, and annual per-case inventory holding cost (cost of capital, insurance, etc.) at 25 percent of purchase cost. Furthermore, assume that both new warehouses would use the EOQ policy. Suppose that the distributor follows the consultant's recommendation and ends up operating two warehouses. (h) What would be the EOQ (in cases) for the North Austin warehouse? Choose the nearest integer. (1) (i) What would be the (average) number of deliveries to the South Austin warehouse by the supplier every year? Choose the nearest integer. (1) (j) How much (in $) on average would the distributor have to pay per year for deliveries by the supplier? Choose the nearest hundred (= a multiple of 100). (k) For the distributor, what would be the annual ordering plus holding costs ($)? Choose the nearest integer. (1) (1)
Expert Answer:
Posted Date:
Students also viewed these general management questions
-
The interests of acquirers and targets are similar in that both want to: Question 25 options: Limit information to other bidders Close the deal quickly Avoid a bidding war Acquire information from...
-
CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...
-
Formularium Management III Kevin Denis June 18, 2014 Use at own risk. Part I Inventory Control 1 Known demand (p198) 1.1 Basic EOQ model (p210) Assumptions: 1. Demand is xed at units per unit time....
-
Subsequent Events and Subsequently Discovered Facts. Michael Ewing is auditing the financial statements of Dallas Company for the year ended December 31, 2014. In concluding the process of gathering...
-
What is the decision rule for determining the acceptability of sample results when classical variables sampling is used?
-
You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under four different economic conditions has the...
-
You have the following income statements for each of the four quarters of a restaurant operation: The owner is contemplating closing the restaurant in the fourth quarter in order to eliminate the...
-
Steve has just returned from salmon fishing. He was lucky on this trip and brought home two salmon. Steve's wife, Wendy, disapproves of fishing, and to discourage Steve from further fishing trips,...
-
ofiling the Risk Tolerance of Higher Education Students in Zambia 1Mashombotwa Mukwena, 2Macmillan Handema 1,2School of Baf after reading a case study below please come up with quiz questions Zambia...
-
Required: Prepare a comparative income statement for the company, showing in adjacent columns the profits earned from the sale of the product, assuming the company uses a periodic inventory costing...
-
Business firms can show their social responsibility toward employees by providing a safe workplace that provides equal employment opportunities and is free of harassment.
-
Which side of the issue are you on and why? What are the constitutional powers of the U . S . President and the U . S . Senate in choosing a new Justice to the court?
-
A retailer wants to stock a radio selling for R20 in order to meet the competition from a nearby store.He allows 30% of the selling price for overhead expenses and 12% of the selling price for net...
-
Can companies have a social responsibility beyond maximizing profits for shareholders?
-
Suggest any FIVE (5) strategies to overcome the reported Justice Theory, Deontology, and utilitarianism in the context of business ethics.
-
with detailed solution clear photo \f
-
When you weigh yourself on good old terra firma (solid ground), your weight is 142 lb. In an elevator your apparent weight is 121 lb. What are the direction and magnitude of the elevator's...
-
Maricopa Company produces two products and uses a predetermined overhead rate to apply overhead. Maricopa currently applies overhead using a plantwide rate based on direct labor hours. Consideration...
-
Glencoe First National Bank operated for years under the assumption that profitability can be increased by increasing dollar volumes. Historically, First Nationals efforts were directed toward...
-
Cushing Medical Clinic operates a cardiology care unit and a maternity care unit. Ned Carson, the clinics administrator, is investigating the charges assigned to cardiology patients. Currently, all...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App