Emery Pharmaceutical uses an unstable chemical compound that must be kept in an

Question

Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses 825 pounds per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), and estimates order costs to be $45 per order. The cost schedules of two suppliers are as follows: This exercise contains only parts a, b, and c. a) What is the economic order quantity for each supplier? For Vendor 1 at $17.00/pound, the economic order quantity is [ ] units

Explanation / Answer

Vendor 1:

Q1 = (2*825*12*45) / (0.5*17) = 324

Q2 = (2*825*12*45) / (0.5*16.75) = 327

Q3 = (2*825*12*45) / (0.5*16.5) = 329

Economic order quantity of vendor 1 = 324

Vendor 2:

Q1 = (2*825*12*45) / (0.5*17.10) = 323

Q2 = (2*825*12*45) / (0.5*16.85) = 326

Q3 = (2*825*12*45) / (0.5*16.60) = 328

Q4 = (2*825*12*45) / (0.5*16.25) = 332

Economic order quantity of vendor 2 = 323

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