1. What MOQ would produce the same total relevant costs for the two alternatives (the regular price option versus the discount price option with the MOQ = 1000 units)?
2. Is this useful information for Seal Point? Explain. (Please do not overlook the second part of this question) (20 points)
3. If the supplier insists on 1,000 units for the MOQ, what discount price should Milo try to negotiate? Therefore, with the MOQ at 1000, as you change the discount price you will find a point where the TRC of the regular price option (Order Size = 141) will equal the TRC of the discounted price option (Order size MOQ = 1000) ... in other words, the savings will be zero! (20 points)
4. What is the average flow time for the regular price option? What does your average flow time result tell you about the fabric inventory held by Seal Point? (20 points)
5. The Just-in-Time (JIT) approach attempts to greatly reduce cycle stock inventory levels from those produced by the EOQ model.This is achieved in part by ordering in much smaller quantities than the EOQ. In the EOQ model, when order quantity is reduced, what annual cost rises? Please explain why this cost rises. (15 points)
6. 5. What is the effect (increase, decrease, no effect) of a change in the replenishment quantity (the order quantity) on annual ordering cost, annual holding cost, and annual purchasing cost? For example, if we increase the replenishment quantity does the annual ordering cost go up, go down or stay the same. (Assume that annual purchasing costs do not include transport expenses)
7. Please explain your answer in each case. This question is asked without reference to the situation in the Seal Point case. (25 points)