Maggie 52m ago from Camera Roll ..Il Verizon 6:24 a. m Chapter 7 E0Q and ABC ana
ID: 3116358 • Letter: M
Question
Maggie 52m ago from Camera Roll ..Il Verizon 6:24 a. m Chapter 7 E0Q and ABC analysis Michigan State Figurine Inc. (MSF) sells crystail figurines to Spartan fans. MSF buys the figurines from a manufacturer for $35 per unit. They send orders electronically to the manufacturer, costing $65 per order and they experience an average lead time of six days for each order to arrive from the manufacturer. Their inventory carying cost is 20 percent. The average daily demand for the figurines is three units per day. They are open for business 250 days a year. The supplier decides to offer a volume discount. They will sell the crystal figurines at $11 per unit for orders of 375 units or more. Answer the following questions a. How many units should the firm order each time? Assume there is no unoetainty at al about the demand or the lead time. (Round your answer to the nearest whole b. How many orders will they place in a year c. What is the average inventory d. What is the annual ordering cost? e. What is the annual inventory carrying cost? CHATExplanation / Answer
a) Order arrives after 6 days
Demand per day =3 units
Units for 6 days = 6*3 =18
They should order 18 units in one order
b) They should place order after every 6 days
Order on - 1st day then 7th day then 13th day Last day would be 361th day
But as they are in business for 250 days in a year then last day would be 247th day
Total no. of days in year
Using arithmetic progression
=> 247 = 1 +6(n-1)
=> n-1= 246/6
=> n = 41 +1 =42
They will place 42 orders in a year
c) Average inventroy = 3 units
d) Annual Ordering cost = (No. of orders * No of units * Cost of ordering of unit )+ ( No. of orders*Cost of sending orders electronically)
= (42 * 18 * 35) + (42*65) = 26460 + 2730=$ 29,190
e) Annual inventory Cost = 20% of Annual Ordering cost =0.2 * 29190 = $ 5,838
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