a. If Sarah wants to minimize her annual ordering and inventory holding costs. how much palm oil should she purchase with each order (in kg)? (Do not round intermediate calculations.) If Sarah orders 3,750 kg with each order, what would be the annual sum of the ordering and holding costs? kgs

a. If Sarah wants to minimize her annual ordering and inventory holding costs. how much palm oil should she purchase with each order (in kg)? (Do not round intermediate calculations.) If Sarah orders 3,750 kg with each order, what would be the annual sum of the ordering and holding costs? kgs

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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Question

Need a,b,c,d

Sarah's Organic Soap Company makes organic liquid soap. One of the raw materials for her soaps is organic palm oil. She
needs 1,400 kg of palm oil per day on average. The supplier charges a $60 delivery fee per order (which is independent of
the order size) and $5.25 per kg. Sarah's annual holding cost is 20 percent. Assume she operates and sells five days per
week, 52 weeks per year.
a.
If Sarah wants to minimize her annual ordering and inventory holding costs.
how much palm oil should she purchase with each order (in kg)?
(Do not round intermediate calculations.)
If Sarah orders 3,750 kg with each order, what would be the annual sum of
the ordering and holding costs?
(Round your answer to 3 decimal places.)
C.
If Sarah orders 7,600 kg with each order, what would be the sum of the
ordering and holding costs per kg sold?
(Do not round intermediate calculations. Round your answer to the nearest
whole dollar amount.)
Sarah's supplier is willing to sell her palm oil at a 5 percent discount if she
d. purchases 15,000 kg at a time. If she were to purchase 15,000 kg per order,
what would be her annual sum of the ordering and holding costs?
kgs
per kg

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Step 1: Introduce economic order quantity

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Step 2: Determine the amount of oil to be purchased:

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Step 3: Determine the sum of ordering and holding cost when EOQ = 3750

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Step 4: Determine the sum of ordering and holding cost per kg when EOQ = 7600

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Step 5: Determine the sum of annual ordering and holding cost when EOQ = 15000 and discount 5%

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