Company A is selling packing material to the consumer products company B. Compan
ID: 338577 • Letter: C
Question
Company A is selling packing material to the consumer products company B. Company B needs 1.021 km of a certain carton per year. The costs structure is as follows.
q
unit
Price (?) per km
10
km
310.00
50
km
243.00
100
km
230.00
150
km
227.00
200
km
223.00
300
km
222.40
Orders below 10,000 m are not allowed.
The company uses a holding cost rate of 30% per year. An economist has determined the fixed ordering costs at company B and he has arrived at a value of 8 euro per order. Assuming the lowest price (222,4 euro / 1000 m), calculate the optimal order quantity using the EOQ model. Is the assumed price valid under this quantity? Next, determine the optimal order quantity while taking the discount price structure into account.
q
unit
Price (?) per km
10
km
310.00
50
km
243.00
100
km
230.00
150
km
227.00
200
km
223.00
300
km
222.40
Explanation / Answer
Company A is selling packing material to the consumer products company B. Company B needs 1.021 km of a certain carton per year. The costs structure is as follows.
q
unit
Price (?) per km
10
km
310.00
50
km
243.00
100
km
230.00
150
km
227.00
200
km
223.00
300
km
222.40
Orders below 10,000 m are not allowed.
The company uses a holding cost rate of 30% per year. An economist has determined the fixed ordering costs at company B and he has arrived at a value of 8 euro per order. Assuming the lowest price (222,4 euro / 1000 m), calculate the optimal order quantity using the EOQ model. Is the assumed price valid under this quantity? Next, determine the optimal order quantity while taking the discount price structure into account.
q
unit
Price (?) per km
10
km
310.00
50
km
243.00
100
km
230.00
150
km
227.00
200
km
223.00
300
km
222.40
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