Q4- Bell Computers purchases integrated chips at $350 per chip. The ordering cos
ID: 356779 • Letter: Q
Question
Q4- Bell Computers purchases integrated chips at $350 per chip. The ordering cost is S120 per order, and sales are 400 per month. The company's supplier, Rich Blue Chip Manufacturing, Inc., decides to offer price concessions in order to attract larger orders. The price structure is shown below Rich Blue Chip's Price Structure Quantity purchased 1-99 units 100-199 units 200 or more units$300r Price/unit $350 $325 a) What is the optimal order quantity and the minimum annual cost for Bell Computers to order, purchase, and hold these integrated ships if carrying costs are 10% of purchasing price per unit on an annual basis? b) What is the optimal order quantity and the optimal annual total cost if the holding cost is fixed at $35 per unit per year?Explanation / Answer
A) D(Annual demand) = 400 *12 = 4,800,
P (Purchase price/Unit) = $350/unit,
H(Holding cost /Unit) = $35/unit/year,
S (Ordering cost/Order) = $120/order.
Q = ?(2*D*S)/H = ?(2*4,800*120)/35 = 181.42 = 181 units .
TC (total cost) = P*D + H*Q/2 + S*D/Q = (4,800 * 325) + ((35*180)/2) + ((120*4,800)/181) = $1,560,000 + 3,168 + 3,182 = $1,566,350, when Price = $325 / unit.
If Bell Computers orders 200 units,
then Total cost = (4,800*325) + ((35*200)/2) + ((120*4,800)/200) = 1,440,000 + 3,500 + 2,800 = $1,446,380
Thus, Bell Computers orders 200 units at total cost of $1,446,380.
B) Q1= ?(2D*S)/H = ?(2*4,800*120)/35 = 181 units
Q2= ?(2*4,800*120)/32.5 = 188 units
Q3= ?(2*4,800*120)/30 = 196 units
So, EOQ= 188 units.
Total cost = (188/2)*32.5 + 325*4800 + (4800/188)*120 = $1566120
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.