2. Avondale ice-cream shop in St Catherine's has been buying vegan-custard for its own plant base chunky chocolate passion explosion flavor using EOQ analysis. The supplier has now offered Avondale a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly. Current data for the problem are: D = 720 units per year; S = $6.00, I = 20% per year; P = $25. (a) What is the EOQ at the current behavior? (b) What is the annual total cost, including product cost, of continuing their current behavior? (c) What are the annual total costs, if they accept either of the proposed discounts? (d) At the cheapest of the total costs, are carrying costs equal to ordering costs? Explain.
2. Avondale ice-cream shop in St Catherine's has been buying vegan-custard for its own plant base chunky chocolate passion explosion flavor using EOQ analysis. The supplier has now offered Avondale a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly. Current data for the problem are: D = 720 units per year; S = $6.00, I = 20% per year; P = $25. (a) What is the EOQ at the current behavior? (b) What is the annual total cost, including product cost, of continuing their current behavior? (c) What are the annual total costs, if they accept either of the proposed discounts? (d) At the cheapest of the total costs, are carrying costs equal to ordering costs? Explain.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Transcribed Image Text:2. Avondale ice-cream shop in St Catherine's has been buying vegan-custard for its own plant base
chunky chocolate passion explosion flavor using EOQ analysis. The supplier has now offered
Avondale a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off
if the firm will make its purchases quarterly. Current data for the problem are: D = 720 units per
year; S= $6.00, I= 20% per year; P= $25.
(a) What is the EOQ at the current behavior?
(b) What is the annual total cost, including product cost, of continuing their current behavior?
(c) What are the annual total costs, if they accept either of the proposed discounts?
(d) At the cheapest of the total costs, are carrying costs equal to ordering costs? Explain.
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