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Tshabalala's Sport, a sporting goods store, is planning how many soccer balls it should purchase at one time and how often they should be purchased.
Tshabalala's Sport, a sporting goods store, is planning how many soccer balls it should purchase at one time and how often they should be purchased. It estimates that demand is constant at around 2000 balls per month. The average storage cost is historically R1000 per 80 balls per month. Past experience showed that soccer balls depicting last season's branding do not sell unless they are sold at a big discount. Ordering too little is also a problem as customers move their purchases to a competitor. Tshabalala sells a soccer ball for R120 and the purchase price is R65. Every order attracts delivery costs of R600 per order, irrespective of the size of the order. It takes three weeks from ordering to receiving the balls. Source: Ariel (2018) Calculate the following: 4.1 Economic order quantity (7 Marks) 4.2 Optimal variable cost (3 Marks) 4.3 Optimal total cost (4 Marks) 4.4 Reorder level (4 Marks) 4.5 Cycle length (2 Marks)
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