PLEASE FIND ANSWER TO FIRST 4 QUESTIONS : Answer to question a: Order quantity =

Question

PLEASE FIND ANSWER TO FIRST 4 QUESTIONS :

Answer to question a:

Order quantity = 750 Gallons

Average inventory = 750 /2 = 375 Gallons

AVERAGE INVENTORY = 375 GALLONS

Answer to question b:

Annual demand = 200 Gallons/ week x 52 weeks = 10400 Gallons

Order Quantity = 1250 Gallons

Hence, number of orders to be placed with supplier each year = 10400 / 1250 = 8.32

NUMBER O ORDERS TO BE PLACED WITH SUPPLIER EACH YEAR = 8.32

Answer to question c :

Economic Order Quantity ( EOQ) model will be used to calculate optimal order quantity which minimizes total ordering cost and inventory holding cost .

Accordingly,

EOQ = Square root ( 2 x Co x D/ Ch )

Co = Ordering cost = $25

Ch = Annual unit holding cost = 25% of $1.25 = $0.3125

D = Annual demand = 200/ week x 52 weeks = 10400

Therefore ,

EOQ = Square root ( 2 x 25 x 10400/ 0.3125)

         = 1289.96

JOE WOULD ORDER 1289.96 GALLONS EACH TIME FROM HIS SUPPLIER

Answer to question d :

Order quantity = 2500 Gallons

Annual ordering cost = Ordering cost x Number of orders = Ordering cost x Annual demand / Order quantity = 25 x 10400/2500 = $ 104

Annual inventory holding cost = Annual unit inventory holding cost x Average inventory = Ch x Order quantity/ 2 = $0.3125 x 2500/2 = $390.62

Sum of ordering and holding cost per Gallon = $104 + $390.62 = $494.62

Hence sum of ordering and holding cost per Gallon = $494.62 / 2500 = 0.1978 ( $0.198 rounded to 3 decimal places)

SUM OF ORDERING AND HOLDING COST PER GALLON = $0.198

AVERAGE INVENTORY = 375 GALLONS

Explanation / Answer

Joe Birra needs to purchase malt for his micro-brew production. His supplier charges $25 per delivery (no matter how much is delivered) and $1.25 per gallon. Joe's annual holding cost is 25% of the price per gallon. Joe uses 200 gallons of malt per week. a. Suppose Joe orders 750 gallons each time. What is his average inventory? gallons (Round your answer to 2 decimal places.) b.Suppose Joe orders 1250 gallons each time. How many orders does he place with orders his supplier each year? How many gallons should Joe order from his supplier with each order to minimize the sum of ordering and holding costs? gallons (Round your answer to 3 decimal places.) Suppose Joe orders 2500 gallons each time he places an order with the supplier What is the sum of ordering and holding costs per gallon? per gallon (Round your answer to 2 decimal places.) Suppose Joe orders the quantity from part (c) that minimizes the sum of the ordering and holding costs each time he places an order with the supplier. What is the annual cost of the EOQ expressed as a percentage of the annual purchase cost? If Joe's supplier only accepts orders that are an integer multiple of 1,000 gallons gallons how much should Joe order to minimize ordering and holding costs per gallon? Joe's supplier offers a 3.00% discount if Joe is willing to purchase 8000 gallons or he were to take advantage of the discount? g.more. What would Joe's total annual cost (purchasing, ordering and holding) be if

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