Answered: Question 1: Lou operates a cab service…

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 2: Maplewood Confections is a wholesale pastry producer that supplies desserts like tarts and cupcakes to a variety of cafes and delicatessens. Sugar is a critical ingredient in most of their recipes, and they use it consistently. Their current strategy involves ordering 16,000 pounds of sugar every four weeks. Since they operate 5 days a week and approximately 250 days a year, this schedule translates to about 20 working days per order cycle. Their supplier offers sugar in 50-pound bags at a cost of $20 per bag. Each time an order is placed, Maplewood incurs a fixed cost of $64. The annual cost of holding inventory is calculated at 25%. a) Determine Maplewood Confections' annual inventory-related costs (both holding and ordering) under their current ordering regime. Also, calculate the inventory costs per unit of demand. Is there a more efficient ordering policy that you can recommend? Due to an expansion in business, Maplewood has gained numerous new contracts, effectively doubling their weekly sugar requirements. The purchasing manager wants to maintain the simplicity of ordering once every four weeks but suggests doubling the order quantity instead. The lead baker prefers a more frequent ordering schedule, recommending an order of 16,000 pounds every two weeks. b) What would be the annual total inventory costs and the per-unit inventory costs under the purchasing manager's plan? What about under the lead baker's plan? c) What is the optimal order quantity for Maplewood Confections? What are the associated annual total inventory costs and per-unit inventory costs under this optimal ordering quantity?