B. what is the total Annual cost associated with the best order quantity? The Bu
ID: 346399 • Letter: B
Question
B. what is the total Annual cost associated with the best order quantity?
The Bucks Grande exhibition baseball team plays 50 weeks each year and uses an average of 300 baseballs per week. The team orders baseballs from Coopers-Town Inc., a ball manufacturer noted for si-sigma level consistency and high product quality. The cost o order baseballs s $100 per order and the annual holding cost per a s 38% of the purchase price. Coopers Town's price st cture 1s shown in the table be Order Quantity 1-999 1,000-4,999 5,000 or more Price per Unit $7.60 $6.90 $6.60 baseballs should the team buy per o rder? The team should buy baseballs per order.(Enter your response rounded to the nearest whole number.)Explanation / Answer
Demand (D) = Number of week*Usage per week = 50*300 = 15000
Set up cost (S) = 100
Holding cost % = 38
Assuming Price 7.6
Holding cost = 7.6*38% = 2.89
EOQ = sqrt(2*D*S/H) = sqrt(2*15000*100/2.89) = 1019.2
The units are outside range
Now assume Price 6.9
Holding cost = 6.9*38% = 2.62
EOQ = sqrt(2*15000*100/2.62) = 1069.7. Round off to 1070
So, it is within range
Total cost = D/EOQ*S + EOQ/2*Holding cost + Price*D
For 1070:
Total cost = 15000/1070*100 + 1070/2*2.62 + 6.9*15000 = 106304.6
For EOQ = 5000
Total cost = 15000/5000*100 + 5000/2*(6.6*38%) + 6.6*15000 = 105570
So, it is best to order 5000 units as total cost is minimum
Total cost = 105570
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