A food processor uses about 11,250 pounds of wheat each week. The food processor estimates theirholding cost to be 30% per year. A supplier has offered the food processor two options. Option 1 is topurchase wheat in lots of 35,000 pounds (truckload). The price per pound for option 1 is $1.2 per pound.Option 2 is to have wheat delivered by rail. The cost per pound for option 2 would be $1 per pound.Deliveries by rail will include 150,000 pounds of wheat. In either case, the supplier will charge the firm afixed fee of $250 per delivery.Round your answer to two decimal places.What is the total annual (52 week) holding and ordering cost of option 2?dollars

Given data Weekly demand = 11250 pounds of wheat Week in a year 52. Hence, annual demand or total…

Answered: A food processor uses about 11,250…

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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An online retailer sells 1,500 t-shirts per year. The cost of the t-shirts to the store is $3.00 and the cost of placing an order is $15 per order. It cost $0.60 per t-shirt per year for the retailer to hold the t-shirts. The retailer sells the t-shirts for $9.99. Determine (a) the optimal order quantity, (b) the order frequency (c) the annual holding and setup cost.
Ray wishes to determine the optimal order quantity for its best-selling bike in his bike store. Ray pays the supplier a wholesale price of $118 each for this bike. Ray has estimated the average daily demand for this bike is 23 units. The store opens 304 days a year. The cost to carry one bike in the store for a whole year is 8% of the unit bike cost. Ray has estimated that, on average, the order processing cost, i.e., ordering cost, with the bike supplier each time is $152, and it roughly takes 20 working days to receive the order from the supplier. Ray wishes to avoid the stock-out situation with a probability of 95%, and this requires Ray to carry a safety stock of 30 bikes in the store. What is the optimal order quantity (EOQ value) that Ray should order each time from the bike supplier to minimize his long-run inventory cost?
AAA auto supply store sells snow tires which are ordered every Friday to meet next week's demand. The sales price for the most popular size is $50 per tire and its cost for AAA is $35. If too many tires are ordered AAA incurs an inventory carrying cost of $2 per tire. If AAA is out of stock, it forgoes the profits from missed sales. AAA has the option to order 100, 150, or 200 tires to meet next week's demand which can be either 100, 150, or 200 tires.Based on its historical demand distribution, assume that AAA Inc. has determined the followingprobability information: P(100) = 0.4, P(150) = 0.3, and P(200) = 0.3 e. Which alternative should be chosen based on the minimax regret criterion? f. Which alternative should be chosen using the expected monetary value (EMV) criterion? g. What is the expected value under perfect information (EVPI)? Show Work
Currently, a company places orders for diaries to give away as tokens for its customers. Each diary costs the company $137.50. It costs the company $0.65 to place an order for the diaries and $0.87 to carry each diary annually in its inventory. The suppliers wish to offer the company a deal on the cups, by having it pay $85 for each diary, but ONLY if the company orders in sizes of 500 instead of the usual amount. Annual demand for the cups is 8000. Should the company accept the deal?
A manager must make a decision on delivery alternatives. There are two carriers, A and B. Both offer a two-day rate. In addition, A offers a three-day rate and a nine-day rate, and B offers a four-day rate and a seven-day rate. Three hundred boxes are to be delivered and the freight cost for the whole lot for each option is given below. Annual holding cost is 35 percent of unit cost, and each box has a cost of $130. Assume 365 days per year. Which delivery alternative would you recommend? Carrier A Options 2 days 3 days 9 days Carrier A Carrier B Freight Cost $580 520 480 Carrier B Options 2 days 4 days 7 days Freight Cost $570 540 500 Delivery alternative ✓Click to select) D Two-day Three-day Nine-day
Algro Inc. keeps a wide range of parts and materials on hand for use in its production processes. Management has recently had difficulty managing parts inventory as demand for its finished goods has increased; they frequently run out of some critical parts while having an endless supply of others. They would like to classify their parts inventory according to the ABC approach to better control inventory. The following is a list of parts, along with their annual usage and unit value: Item Annual Unit Item Annual Unit Number Usage Cost Number Usage Cost 1 36 $350 2 510 30 3 50 23 4 300 45 5 18 1900 6 500 8 7 710 4 8 80 26 9 344 28 10 67 440 11 510 2 12 682 35 13 1216 95 50 14 10 3 15 820 1 KARAN2222222222 16 60 $610 17 120 20 18 270 15 19 45 50 20 19 3200 21 910 3 12 4750 23 30 2710 24 24 1800 25 870 105 26 244 30 27 750 15 28 45 110 29 46 160 30 165 25 a. Classify the inventory items according to the ABC approach using the dollar value of annual demand. b. Clearly explain why you…
A Mercedes dealer purchases vehicles for $20,000. The annual holding cost is estimated to be 25% of the dollar value of inventory. The dealer sells an average of 500 cars per year. He believes that demand is backlogged, but estimates that if he is short one car for one year, he will lose $20,000 in future profits. Each time the dealer places an order for cars, the ordering cost amounts to $10,000. Determine the Mercedes dealer's optimal (?,?) ordering policy.
A manufacturing plant procures 100,000 filters per year. Each unit has a fixed order cost is $50. To maintain the inventory in optimal conditions, there is a carrying cost rate of 10% per year. The vendor of filters has offered the following price breaks: for orders of more than 5,000 filters, cost is $4.50/unit; for orders between 1,000 and 5,000 filters, cost is $4.75/unit; orders less than 1,000 filters have a cost of $5.00/unit. Find the economic order quantity. Calculate the average annual cost for the optimal solution.
A company usually holds 270 pounds of wax in its warehouse. The company uses 56 pounds of wax per day and it takes 6 days for wax purchased from the supplier to arrive. The holding cost for wax is $0.49 per pound per day. What is the company's average holding cost (per pound for wax)? Note: Round your answer to 2 decimal places.
A supplier for an electronics store has introduced quantity discounts to encourage larger order quantities of cameras. The price schedule is Quantity purchased fewer than 525 at least 525 Suppose the monthly demand at a retail store that buys from this retaller and resells is 175 units. The suppiler charges a feed cost of $180 per shipment. The cameras are expected to sell well for multiple seasons, so multiple replenishment opportunities are possible. If the holding cost is 40%, and the retaller implements periodic review to achieve 15% service level, how much should the retailer order if it has 500 units in stock? Note: Use the 2-table from the lecture notes, and choose the closest answer) Multe Chalce O 250 766 200 Price per unit $80 $75 O 500

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