.ooo AT&T; 3:57 PM Expert Q&A; The vendor inside Kent City Coliseum uses about 1
ID: 448862 • Letter: #
Question
.ooo AT&T; 3:57 PM Expert Q&A; The vendor inside Kent City Coliseum uses about 1,300 boxes of plastic cups annually for soft drinks and beer. There are 1,000 cups in a box. The cups are purchased from a manufacturer in Michigan. The annual carrying cost per box is calculated as 25 percent of the purchase price, and the ordering cost is $50. A box of plastic cups cost $40. However for an order of 100 boxes or more, the cost is $38 per box and for an order of 400 boxes or more it cost $37 Suppose the coliseum opens 200 days 0 O SOLUTIONExplanation / Answer
The annual demand D= 1300 boxes
Ordering Cost = $50
Annual Carrying Cost Ch= 25% of purchase
Annual Carrying Cost Ch = 25%*40 =$10
EOQ = Square root ( 2*D*Co/Ch) = Square root (2*1300*50/10) = 114 Unit
The EOQ is in the discount range , hence discounted EQO has to be considered
Answers
1) Discount Qunatity EOQ
2) 117
3) Total Inventory managing cost + Purchase price = Square root (2*D*Co*Ch) +Q*Price
= Square root (2*1300*50*9.5) +1300*38
= $1111.3+49400 = $50511.3
4) Once an order is placed it takes four days , the requirement for four days = 1300/200 *4 = 26 units
This means, when your stock reaches this level you have to make an order .
For Above 100 units , the price will be $38,
The new carrying cost = 25%*38 = $9.5
The new EOQ = Square root ( 2*D*C0/Ch) = Square root (2*1300*50/9.5) = 116.97 = 117 Units
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