Homework Help is Here – Start Your Trial Now!
Business
Operations Management
Question 2 Consider the company in Question 1. Now the company is considering working with a local supplier. Since the local supplier is located close to the company, there is no restriction on the frequency of the orders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order there is a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate. a) Calculate the economic order quantity. b) order quantity you found in (a) Calculate the total annual cost the company will incur with this supplier if they use the (Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost) The company is also considering producing the product at home. The production rate is 12000 units per year. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holding cost is based on the annual interest rate and the production cost of the product. c) Calculate the economic production quantity. d) How many production runs will be made each year? e) What percentage of the time the production machine will be working? f) Calculate the total annual cost the company will incur if they produce the product at home. g) Which option is less costly for the company, working with the local supplier or producing at home?

Question 2 Consider the company in Question 1. Now the company is considering working with a local supplier. Since the local supplier is located close to the company, there is no restriction on the frequency of the orders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order there is a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate. a) Calculate the economic order quantity. b) order quantity you found in (a) Calculate the total annual cost the company will incur with this supplier if they use the (Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost) The company is also considering producing the product at home. The production rate is 12000 units per year. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holding cost is based on the annual interest rate and the production cost of the product. c) Calculate the economic production quantity. d) How many production runs will be made each year? e) What percentage of the time the production machine will be working? f) Calculate the total annual cost the company will incur if they produce the product at home. g) Which option is less costly for the company, working with the local supplier or producing at home?

Practical Management Science
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...
See similar textbooks
icon
Related questions
Question

i need Q2 solution 

Question 2 Consider the company in Question 1. Now the company is considering working with a local supplier. Since the local supplier is located close to the company, there is no restriction on the frequency of the orders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order there is a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate. a) Calculate the economic order quantity. b) order quantity you found in (a) Calculate the total annual cost the company will incur with this supplier if they use the (Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost) The company is also considering producing the product at home. The production rate is 12000 units per year. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holding cost is based on the annual interest rate and the production cost of the product. c) Calculate the economic production quantity. d) How many production runs will be made each year? e) What percentage of the time the production machine will be working? f) Calculate the total annual cost the company will incur if they produce the product at home. g) Which option is less costly for the company, working with the local supplier or producing at home?
Transcribed Image Text:Question 2 Consider the company in Question 1. Now the company is considering working with a local supplier. Since the local supplier is located close to the company, there is no restriction on the frequency of the orders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order there is a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate. a) Calculate the economic order quantity. b) order quantity you found in (a) Calculate the total annual cost the company will incur with this supplier if they use the (Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost) The company is also considering producing the product at home. The production rate is 12000 units per year. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holding cost is based on the annual interest rate and the production cost of the product. c) Calculate the economic production quantity. d) How many production runs will be made each year? e) What percentage of the time the production machine will be working? f) Calculate the total annual cost the company will incur if they produce the product at home. g) Which option is less costly for the company, working with the local supplier or producing at home?
Question 1 ABC company faces a monthly demand of 800 for a certain type of product. Currently they are ordering the product from an offshore supplier in China. Due to production and shipping restrictions the company places an order from this supplier every month. (i.e. the time between two orders is one months.) Every time they place an order, they need to pay a fixed shipping cost of $120 to the supplier. Each product costs $50 to purchase from this supplier. The holding cost is based on 20% annual interest rate. It takes 0.5 months for the supplier to process the order and the order arrive to the company. a) What is the average inventory level? b), Vhat is the reorder point? c) Calculate the annual inventory holding cost ABC company is currently incurring. d) Calculate the annual ordering cost ABC company is currently incurring. e) Calculate the economic order quantity for the given problem. f) company was using the economic order quantity you found in part (e) Calculate the optimal annual inventory holding cost that would have been incurred if the g) was using the economic order quantity you found in part (e) Calculate the optimal annual ordering cost that would have been incurred if the company h} quantity? Calculate how much the company is losing because they cannot use the economic order
Transcribed Image Text:Question 1 ABC company faces a monthly demand of 800 for a certain type of product. Currently they are ordering the product from an offshore supplier in China. Due to production and shipping restrictions the company places an order from this supplier every month. (i.e. the time between two orders is one months.) Every time they place an order, they need to pay a fixed shipping cost of $120 to the supplier. Each product costs $50 to purchase from this supplier. The holding cost is based on 20% annual interest rate. It takes 0.5 months for the supplier to process the order and the order arrive to the company. a) What is the average inventory level? b), Vhat is the reorder point? c) Calculate the annual inventory holding cost ABC company is currently incurring. d) Calculate the annual ordering cost ABC company is currently incurring. e) Calculate the economic order quantity for the given problem. f) company was using the economic order quantity you found in part (e) Calculate the optimal annual inventory holding cost that would have been incurred if the g) was using the economic order quantity you found in part (e) Calculate the optimal annual ordering cost that would have been incurred if the company h} quantity? Calculate how much the company is losing because they cannot use the economic order
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.
SEE MORE TEXTBOOKS