Personal Printing Company (PPC) uses 500 hinges each month in assembling their p
ID: 448806 • Letter: P
Question
Personal Printing Company (PPC) uses 500 hinges each month in assembling their personal printers. The potential suppliers of hinges charge $8.25 for each hinge. PPC estimates their ordering costs are $250 per order and they use a 20% annual interest rate for determining holding costs Assume there are 20 working days each month and 12 months per year. Recall that unnecessary information may be included. Supplier 1 is located adjacent to PPC and produces and delivers the brackets at a constant rate of 100 brackets per day. Supplier 2 is located adjacent to PPC and delivers the brackets at a constant rate of 10000 brackets per day. Determine the Optimal Order Quantity for PPC to order from each supplier. For each supplier, also calculate the annual ordering costs, purchasing costs, holding costs, and total costs. Complete the table below and indicate the preferred supplier.Explanation / Answer
20 working days each month, and 12 months per year Annual Demand, D 1,20,000 Price/hinge , p $ 8.25 Oredring cost, O $ 250.00 Holding cost, H 20% Supplier Supplier Order Qty (EPL) Oredring cost Purchase Cost Holding costs Average Annual Costs 1 100 $ 3,00,000.00 $ 9,90,000.00 $ 82.50 $ 12,90,082.50 2 10000 $ 3,000.00 $ 9,90,000.00 $ 8,250.00 $ 10,01,250.00 Supplier Order Qty (EPL) is given in the question Ordering cost = O * (D/EPL), as D/EPL gives us the number of orders placed annually Purchase cost = p * D (price/ hinge*annual demand) Holding Cost = (20% * p)*(EPL/2), as EPL/2 gives us the average Inventory, and the H is given as 20% Average Annual Costs = Ordering Cost+Purchase Cost+Holding Cost EOQ = sqrt (2*O*D/H) , here H=20%*8.25 EOQ 6030.2 hinges 6030 is the Optimal Ordering Quantity for PPC
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