Chapter 12, Problem 7QP

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ESTRELLA is a bike retailer located in the outskirts of Bacolod City. ESTRELLA purchases bikes from STORAGEHUB in orders of 250 bikes which is the current economic order quantity. STORAGEHUB is now offering the following bulk discounts to its customers:                                                                                Price 0% discount on orders less than 499                                 P3,500    10% discount on orders above 500 units  - 999                  3,150   15% discount on orders above 1,000 units                          2,975  ESTRELLA is wondering if the EOQ model is still the most economical and whether increasing the order size would actually be more beneficial. Following information is relevant to forming the decision: Annual demand is 5000 units Ordering cost is $100 per order Annual holding cost is 25%   QTY SETUP HOLDING PROODUCT COST TOTAL COST Q1   25423.73 25812.5 what is the product cost what is the total cost Q2   3000 198437.5 what is…

ESTRELLA is a bike retailer located in the outskirts of Bacolod City. ESTRELLA purchases bikes from STORAGEHUB in orders of 250 bikes which is the current economic order quantity. STORAGEHUB is now offering the following bulk discounts to its customers:                                                                                Price 0% discount on orders less than 499                                 P3,500    10% discount on orders above 500 units  - 999                  3,150   15% discount on orders above 1,000 units                          2,975  ESTRELLA is wondering if the EOQ model is still the most economical and whether increasing the order size would actually be more beneficial. Following information is relevant to forming the decision: Annual demand is 5000 units Ordering cost is $100 per order Annual holding cost is 25% How much is the EOQ for each quantity discount? How much should be the EOQ?

UPD Manufacturing produces a range of health care appliances for hospital as well as for home use. The company has experienced a steady demand for its products, which are highly regarded in the health care field. Recently the company has undertaken a review of its inventory ordering procedures as part of a larger effort to reduce costs. One of the company's products is a blood pressure testing kit. UPD manufactures all of the components for the kit in-house except for the digital display unit. The display units are ordered at six-week intervals from the supplier. This ordering system began about five years ago, because the supplier insisted on it. However, that supplier was bought out by another supplier about a year ago, and the six-week ordering requirement is no longer in place. Nonetheless, UPD has continued to use the six-week ordering policy. According to purchasing manager Tom Chambers, “Unless somebody can give me a reason for changing, I'm going to stick with what we've been…

Brynn is the owner of a spa store that operates 50 weeks per year. Dazzle Shampoo is a high margin stock-keeping unit (SKU), but the product goes out of stock frequently. She decides to use a fixed-quantity system (FQS) and orders boxes of Dazzle Shampoo containing 10 bottles per box from a vendor 160 miles away. She collects the following data with respect to the sales of Dazzle Shampoo. Demand 10 boxes per week Order Cost $40 per order Item Cost $80 per box per year Inventory-Holding Cost 15 percent per year Lead Time 3 weeks Standard Deviation in Weekly Demand 6 Service Level 96 percent Using the given data, it can be concluded that the economic order quantity (EOQ) of the Dazzle Shampoo boxes is   a. more than 25 but less than or equal to 35 boxes.   b. less than 25 boxes.   c. more than 35 but less than or equal to 45 boxes.   d. more than 55 boxes.

Bold Vision, Inc., must purchase toner from a local supplier. The company does not wish to carry raw material inventory and therefore only purchases enough toner to satisfy the demand of each individual batch of cartridges. Each toner cartridge requires one pound of toner. The raw material supplier offers Bold Vision a purchase discount of $2.00 per pound if the company orders at least 2,000 pounds at a time. Should Bold Vision accept this offer and alter its toner purchase quantity?

The Frist Corporation has the followinginternal controls related to inventory:1. Only authorized inventory warehousing personnel are allowed in inventory storageareas.2. All inventory products are stored in warehousing areas that are segregated fromother storage areas used to house equipment and supplies.3. All inventory held on consignment at Frist Corporation is stored in a separatearea of the warehouse.4. The inventory purchasing system only allows purchases from pre-approved vendors.5. The perpetual inventory system tracks the average number of days each inventoryproduct number has been in the warehouse.6. Microchips are embedded in each product and when inventory items are removedfrom the warehouse to shipping, radio-frequencies signal a deduction of inventoryto the perpetual inventory system.7. On a weekly basis, inventory accounting personnel take samples of inventoryproducts selected from the perpetual inventory system and verify that the inventoryis on-hand in the warehouse…

A manager must set up inventory ordering systems for two new production items, P34 and P35.P34 can be ordered at any time, but P35 can be ordered only once every four weeks. The companyoperates 50 weeks a year, and the weekly usage rates for both items are normally distributed. Themanager has gathered the following information about the items.Item P34 Item P35Average weekly demand 60 units 70 unitsStandard deviation 4 units per week 5 units per weekUnit cost $15 $20Annual holding cost 30% 30%Ordering cost $70 $30Lead time 2 weeks 2 weeksAcceptable stockout risk 2.5% 2.5%a. When should the manager reorder each item?b. Compute the order quantity for P34.c. Compute the order quantity for P35 if 110 units are on hand at the time the order is placed.

Jack Ltd is a market leader in the manufacture of apple juice. They operate areorder level system of inventory management, and the following information isavailable for green apples:Average usage 800 per dayMinimum usage 540 per dayMaximum usage 1260 per dayLead time for replenishment 16-20 dayReorder quantity 19,500 applesRequired:ii Calculate the maximum level of inventory