Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses 825 pounds per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), and estimates order costs to be $46 per order. The cost schedules of two suppliers are as follows:
Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses 825 pounds per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), and estimates order costs to be $46 per order. The cost schedules of two suppliers are as follows:
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Question
Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses
schedules of two suppliers are as follows:
825
pounds per month of the chemical, estimates the holding cost to be
50%
of the purchase price (because of spoilage), and estimates order costs to be
$46
per order. The cost |
Vendor 1
|
Vendor 2
|
||||
|
Quantity
|
Price/lb
|
Quantity
|
Price/lb
|
||
|
1-499
|
$17.00
|
|
1-399
|
$17.10
|
|
|
500-999
|
$16.75
|
|
400-799
|
$16.85
|
|
|
1,000+
|
$16.50
|
|
800-1,199
|
$16.60
|
|
|
|
|
|
1,200+
|
$16.25
|
|
This exercise contains only parts a, b, and c.
a) What is the economic order quantity for each supplier?
For Vendor 1 at
$17.00/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).For Vendor 1 at
$16.75/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).For Vendor 1 at
$16.50/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).For Vendor 2 at
$17.10/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).For Vendor 2 at
$16.85/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).For Vendor 2 at
$16.60/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).For Vendor 2 at
$16.25/pound,
the economic order quantity is
enter your response here
units (round your response to the nearest whole number).b) What quantity should be ordered and which supplier should be used?
Adjust upward the value of EOQ if it is below the allowable discount range. This is done as follows (round your responses to the nearest whole number):
|
Vendor 1
|
Vendor 2
|
||||||
|
Quantity
|
Price/lb
|
Q* (Adjusted)
|
Quantity
|
Price/lb
|
Q* (Adjusted)
|
||
|
1-499
|
$17.00
|
|
enter your response here
|
1-399
|
$17.10
|
|
enter your response here
|
|
500-999
|
$16.75
|
|
enter your response here
|
400-799
|
$16.85
|
|
enter your response here
|
|
1000+
|
$16.50
|
|
enter your response here
|
800-1199
|
$16.60
|
|
enter your response here
|
|
|
|
|
|
1200+
|
$16.25
|
|
enter your response here
|
What is the total cost from Vendor 1 with a
324-unit
lot size?
(round your response to the nearest whole number).What is the total cost from Vendor 1 with a
500-unit
lot size?
(round your response to the nearest whole number).What is the total cost from Vendor 1 with a
(round your response to the nearest whole number).
1,000-unit
lot size?
What is the total cost from Vendor 2 with a
(round your response to the nearest whole number).
323-unit
lot size?
What is the total cost from Vendor 2 with a
400-unit
lot size?
$enter your response here
(round your response to the nearest whole number).What is the total cost from Vendor 2 with an
800-unit
lot size?
(round your response to the nearest whole number).What is the total cost from Vendor 2 with a
(round your response to the nearest whole number).
1,200-unit
lot size?
Therefore the best option is to place the order with
for a lot size of
units.
▼
vendor 1vendor2
▼
324
500
1,000
323
400
800
1,200
c) The total cost of ordering a lot size of 1,200 units from Vendor 2 (which you calculated above) is
(round your response to the nearest whole number).
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