Feels Like 98 has is deciding between two suppliers (A and B) for purchasing bags of barley. The brewery has forecasted that it will require 16,000 bags of barley each year. Demand is relatively constant through the year and the company estimates that it costs $25 for it to place an order with a supplier. Feels Like 98's accountant (Sara) has also calculated that it should use a holding cost that is 20% of the cost of a bag of barley. The two suppliers have given the brewery's supplier relationship coordinator (Ted) a price schedule for bags of barley. Use the information above and price schedules below to complete questions 1 through 3 below

Feels Like 98 has is deciding between two suppliers (A and B) for purchasing bags of barley. The brewery has forecasted that it will require 16,000 bags of barley each year. Demand is relatively constant through the year and the company estimates that it costs $25 for it to place an order with a supplier. Feels Like 98's accountant (Sara) has also calculated that it should use a holding cost that is 20% of the cost of a bag of barley. The two suppliers have given the brewery's supplier relationship coordinator (Ted) a price schedule for bags of barley. Use the information above and price schedules below to complete questions 1 through 3 below

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

See similar textbooks

Similar questions

Buckley Enterprise sells a product that cost $450 per unit and has a monthly demand of 5,000units. The annual holding cost per unit is calculated as 5% of the unit purchase price. It costs thebusiness $75 to place a single order. Currently the business places 12 orders each year.i) What is the total stock administrative cost of Buckley’s current inventory policy?ii) Is this the entity’s cost minimizing solution for this product each year? Explain.
A car manufacturer has holding costs of 37%. One of the items needed in the factory is door handles. For every order, the facotry incurs a fixed cost of $59.00. The manufacturer needs annually 1,900 of the door handles. The door handles supplier offers a price of $11.00 each for quantities of 350 or fewer and a price of $10.23 for quantities over 350 units. Round your answer to the nearest integer value. How many units should the manufacturer order at one time? units What is the total annual cost at this order point?
Letherin Hides is a company that makes boots specifically targeting college students. Forecasts of sales for the next year are 200 in the summer, 450 in the fall, and 500 in the winter. Accessories that are used on the boots are purchased from a supplier for $31.66. The cost of capital is estimated to be 24% per year (or 6% per quarter); thus, the holding cost per item is 0.06(31.66)=$1.9 per quarter (rounded figure). Letherin Hides hires freelance art designers at part-time to craft designs during the summer, and they earn $6.00 per hour. In the fall, labor is more difficult to keep, and the owner must pay $6.50 per hour to retain qualified help. Because of the high demand for part-time help during the winter holiday season, labor rates are higher in the winter, and workers earn $7.75 per hour. Each boot design takes 2 hours to complete. How should production be planned over the three quarters to minimize the combined production and inventory holding costs? The table below provides…
I need a detailed explanation on how to solve this problem: A paint shop implements an inventory policy on its stock of white paint, which costs the store $6 per can. Monthly demand for cans of white paint is normal with mean 28 and standard deviation 8. The replenishment lead time is 14 weeks. Excess demand is backordered, but costs $10 per back ordered can in labor and loss of goodwill. There is a fixed cost of $15 per order, and the holding cost is based on 30% interest rate per annum. In your computations, assume 4 weeks per month. - Write down the model name and parameters. - What are the optimal lot size and reorder points for white paint (include the formulas)? - What is the optimal safety stock (include the formula)? *** Suppose the paint shop from the above problem adopts a service level policy. - What are the optimal lot size and reorder points for white paint, such that 90% of the cycles are filled without backordering (include all formulas)? - What is the fill rate…
A department store uses a (Q, R) policy to control its inventories. Sales of a pocket FM radioaverage 1.4 radios per week. The radio costs the store $50.00, and fixed costs of replenishmentamount to $20.00. Holding costs are based on a 20 percent annual interest charge, and thestore manager estimates a $12.50 cost of lost profit and loss of goodwill if the radio is demanded when out of stock. Reorder lead time is 2 weeks, and statistical studies have shownthat demand over the lead time is accurately described by a Poisson distribution. Find the optimallot sizes and reorder points for this item.
Long last Appliance Store has a demand of 1300 units per month for one of its fast selling portable smoothie machine (model G), it incurs a fixed order placement, transportation and receiving cost of $3000 each time an order is delivered. Each machine cost the company $550 and the company has a holding cost of 12%. The company has two other models of the smoothie machine which are also popular with consumers. Evaluate the company’s inventory management policy if lots for each model are ordered and delivered independently by determining the following: The optimal order size The cycle inventory The number of orders per year The annual ordering and holding cost The total cost of the inventory Briefly state rationale for the approach used for (a-e)
Buckley Enterprise sells a product that cost $450 per unit and has a monthly demand of 5,000 units. The annual holding cost per unit is calculated as 5% of the unit purchase price. It costs the business $75 to place a single order. Currently the business places 12 orders each year. i) What is the total stock administrative cost of Buckley’s current inventory policy? ii) Is this the entity’s cost minimizing solution for this product each year? Explain.
An auto parts supplier sells Hardy-brand batteries to car dealers and auto mechanics. The annual demand is approximately 1,200 batteries. The supplier pays set up cost equal to $20 for each battery and estimates that the annual holding cost is $8.4. The working days for the company are 300 days per year Determine the economic order quantity (EOQ). b. How many orders will be placed per year using the EOQ? c. What is the expected time between orders? d. Determine the ordering, holding, and total inventory costs for the EOQ
A bedding store has a steady demand for 300 mattresses each year. The store orders mattresses from a regional wholesaler at a cost of $50 per order. The cost of each mattress depends on the order size, and the annual holding cost for mattresses is 5% of the unit cost. The store sells the mattresses for a retail price of $250. a. Use this information to fill in the following table in your answer booklet: D Annual demand Order cost Co Holding cost ratio I Selling price per unit 7" Annual revenue rD b. The wholesaler offers the following discounts depending on the order size: Discount category Order size Discount Unit cost C 1 0-49 0% $200 2 50-99 5% $190 3 100 or more 10% $180 For each discount category, find the holding cost C₁, economic order quantity Q and total annual cost TC TC = = 10 °C ₂ + 2 = C₁ + DC Co+DC. How many mattresses should the store order at a time to minimise the total annual cost? c. Fill in the following table in your answer booklet based on the economic order…
An auto parts supplier sells Hardy-brand batteries to car dealers and auto mechanics. The annual demand is approximately 1,200 batteries. The supplier pays $28 for each battery and estimates that the annual holding cost is 30 percent of the battery’s value. It costs approximately $20 to place an order (managerial and clerical costs). The supplier currently orders 100 batteries per month. a) Determine the ordering, holding, and total inventory costs for the current order quantity. b) Determine the economic order quantity(EOQ). c) How many orders will be placed per year using the EOQ? d) Determine the ordering, holding, and total inventory costs for the EOQ. How has ordering cost changed? Holding cost? Total inventory cost?
For one of the quick selling portable smoothie machines (model G), the Long Last Appliance Store needs 1,300 pieces a month and each time a shipment is shipped, it has a set order placement, transportation and delivery costs for $3,000. Each computer costs the corporation $550 and its holding costs are 12 percent. The business has two other smoothie machine versions that are both common with customers. Assess the company's material control strategy whether lots are purchased and separately shipped for each model by deciding the following: The best order size The cycle inventory The volume of orders annually The monthly buying and maintenance costs The average inventory expense Short state reasoning for the strategy (a-e)
A firm incurs a fixed order cost of $10 per order and 20 percent annual holdingcosts. It purchases an item for $2.50 and sells 1000 units per year. It is offered a 5 percentdiscount if it purchases 800 units or more. How much does it save each year (includingpurchasing, ordering, and holding costs) if it purchases enough units to get the discount?