Please show me how to do these! A wholesale distributor stocks and sells low flo

ID: 2758823 • Letter: P

Question

Please show me how to do these!

A wholesale distributor stocks and sells low flow toilets to contractors for use in commercial office buildings. The estimated annual demand for the toilets is 5,150 units. The estimated average demand per day is 22 units. The purchase cost from the toilet manufacturer is $140.00 per unit. The lead-time for a new order is 6 days. The ordering cost is $94.00 per order. The average holding cost per unit per year is $4.20. The distributor has traditionally ordered 210 units each time they placed an order. Based upon using the distributor’s current ordering model: (5 points each for a total of 25 points)

Question 1: What is the average number of units in inventory based upon ordering 210 units each time an order is placed? (5 points)

Question 2: How many orders per year will be necessary based upon ordering 210 units each time an order is placed? Round your answer to two decimals. (5 points)

Question 3: What is the average dollar value of inventory based upon ordering 210 units each time an order is placed? (5 points)

Question 4: What is the total annual cost (Purchase Cost + Ordering Cost + Holding Cost) based upon ordering 210 units each time an order is placed? (5 points)

Question 5: What is the optimal reorder point based upon ordering 210 units each time an order is placed? (5 points)

Explanation / Answer

Solution:

Average number of units in inventory based upon ordering 210 units each time an order is placed = ½ x lot size of each order = 1/2 of Re-order quantity = ½ x 210 Units = 105 Units

Number of orders per year will be necessary based upon ordering 210 units each time an order is placed

Number of Orders = Total Annual Demand / Order quantity at one time

Estimated Annual Demand = 5,150 Units

Order Quantity to be placed at one time = 210 Units

Number of Orders in a year = 5,150 / 210 = 24.52 Orders

What is the average dollar value of inventory based upon ordering 210 units each time an order is placed?

Average dollar value of Inventory = ½ x lot size x average holding cost per unit per annum = ½ x 210 x $4.20 = $441

Calculation of Total Annual Cost

Purchase Cost (5,150 Units x $140)

$721,000.00

Ordering Cost (24.52 Orders x $94 per order)

$2,304.88

Holding Cost (1/2 x 210 Units x $4.20)

$441.00

Total Cost

$723,745.88

Please ask separate question for 5 --- thank you and happy to help you