Acompany uses 2,000 units of a product each year(constant usage). The product is purchased from asupplier at a unit cost of $4; however, the companymust pay the freight from the splir's plant, Each unitweighs 5 pounds; the shpping cost is 20 cents perpound. The company estimates the ordrprocessgcost is $25 per order; inventory holding costs are 20percent per dollar per year.1. Find the optimal order quantity,2. Suppose that for shipments above 300 poundsbut less than 10,000 pounds, a flat charge of $50per shipment (not per pound) is charged, while forshipments below 300 pounds that rate remains at20 cents per pound. Now, what order quantityshould be used to minimize the sum of all relevantvariable costs?

Given, Annual demand = 200 units Unit cost, u = $4 + (5×20) = $5 Ordering cost, o = $25 Inventory…

Answered: Acompany uses 2,000 units of a product…

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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