Answered: The catering manager of La Vista Hotel,…

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

The catering manager of La Vista Hotel, Lisa Ferguson, is distu rbed by the amount of silverware she is losing every week. Last Friday night, when her crew tried to set up for a banquet for 500 people, they did not have enough knives. She decides she needs to order some more silverware, but wants to take advantage of any quantity discounts her vendor will
offer.
For a small order (2,000 or fewer pieces), her vendor quotes a price of$1.80 piece.
I f she orders 2,001- 5,000 pieces, the price drops to $ 1.60/piece. 5,001- 10,000 pieces brings the price to $1.40/ piece, and I 0,00 I and above reduces the price to $1.25.
Lisa's order costs are $200 per order, her annual holding costs are 5%, and the annual demand is 15,000 pieces. For the best option:
a) What is the optimal order quantity?
b) What is the annual holding cost?
c) What is the annual ordering (setup) cost?
d) What a re the annual costs of the silverware itself with an optimal order quantity?
e) What is the total annual cost, including ordering, holding, and purchasing the silverware?

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