Problem #3 - Brass Department Store-Modified, from textbook page #202.The supplier for toy race cars has revised the quantity discount schedule and presented as follows:Discount (%)Discount Cost ($)Discount QuantityO to 500500 to 1,5001,500 and overDiscount Number16.00255.703105.40Determine the which order quantity that minimize the total inventory cost.Page 3 of 4CS Scanned with CamScanner Let's see how this procedure can be appled by showing an example.Brass Department Store stocks toy race cars. Recently, the store wasgiven a quantity discount schedule for the cars; this quantity discountschedule is shown in Table 630. Thus, the normal cost for the toy racecars is $5. For orders between 1,000 and 1,999 units, the unit cost is$4.80, and for orders of 2,000 or more units, the unit cost is $4.75.Furthermore, the ordering costs $49 per order, the arnual demand is5,000 race cars, and the inventory carrying charge as a percentage ofcost, I, is 20% or 0.2. What order quartity will minimize the totalinventory cost?The first step is to compute E00 for every discount in Table 630 Thisis done as follows:EOQ -700 cars per orderEOQ, -714 cars per orderEOQ, -- 718 cars per oeder202

Answered: Problem #3- Brass Department Store -…

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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Why do the basic EOQ model variations not include theprice of an item?
A material manager adopts the policy to place an order for a minimum quantity of 500 of a particular item in order to avail a discount of 10 percent. It was found from the company records that for last year 8 orders were placed each of size 200 Nos, ordering cost is ksh 500 per order. Inventory carrying charges at 40 per cent cost unit is ksh 400. (a) Show whether the purchase manager is justified in his decision (b) What is the effect of this decision on the company
K Cesar Rego Computers, a Mississippi chain of computer hardware and software retail outlets, supplies both educational and commercial customers with memory and storage devices. It currently faces the following ordering decision relating to purchases of disks: Quantity needed to qualify for the discount = 6,000 disks. What is the EOQ? EOQ = units (round your response to the nearest whole number). D S I Purchase price Discount price 36,100 disks $28 21% $0.89 $0.84
3. Fortnex is a company that assembles small household appliances including coffee makers, toasters, and food mixers. The parent company of Fortnex has been concerned about the rising product cost of the finished products, which has led to reduced profit margins. One of the demands of the parent company has been to review the inventory management practices of Fortnex. Two areas which Fortnex is currently investigating are economic order quantity EOQ and ABC analysis. Perform the following. (i) At present the company purchases copper wire for a certain appliance under economic order quantities based on the information given in Table 3-1. The supplier of copper wire is proposing a discount of 5% of unit price if Fortnex purchases in lot sizes of 1000 kg. rather than the calculated EOQ. Determine if Fortnex should take advantage of the price discount. Justify your response. For a particular series of referenced products, the number of units used a year, and the unit cost are as shown in…
Discuss why is it not necessary to include product cost in the EQQ model, but the quantity inventory system, discount model requires this information ?
Exercise on EOQ and TAIC: Data: D = 7000 flyers, Q = 500 flyers S = $100, k = 28%, C = $2, number of days/year = 350 days Calculate the total cost and the total inventory cost to see if the company's ordering policy needs to be changed. If yes, how should it be changed? Question 2: This year's forecast for D is 8000 flyers/year. The following price list is given according to quantity: Quantity Price 599- 999 2,5$ 1000- 1999 2$ > 2000 1,5 $ How should the ordering policy be changed? (Note: questions about ordering policies like this require finding two factors: when to order and how much to order each time.)
12.27 Chris Sandvig Irrigation, Inc., has summarized the price list from four potential suppliers of an underground control valve. See the accompanying table. Annual usage is 2,400 valves; order cost is $10 per order; and annual inventory holding costs are $3.33 per unit. Which vendor should be selected and what order quantity is best if Sandvig Irrigation wants to minimize total cost? PX VENDOR A QUANTITY 1-49 50-74 75-149 150-299 300-499 500+ VENDOR C QUANTITY 1-99 100-199 200-399 400+ PRICE $35.00 34.75 33.55 32.35 31.15 30.75 PRICE $34.50 33.75 32.50 31.10 VENDOR B QUANTITY 1-74 75-149 150-299 300-499 500+ PRICE $34.75 34.00 32.80 31.60 30.50 VENDOR D QUANTITY 1-199 200-399 400+ PRICE $34.25 33.00 31.00
Explain why it is not necessary to include product cost(price or price times quantity) in the EOQ model, but thequantity discount model requires this information.
Calculate total annual cost for the alternative suppliers for aproduct with following characteristics: montly demand; mean: 5000, standard deviation 2000 Holding cost: 30% Cycle service level: 98% Using EOQ formula, find the lot size. Don’t forget to add ordering cost to the total cost! Supplier 1 Supplier 2 Supplier 3 Ordering Cost(per order ) 1000 2000 5000 Cost 10 9 8 Average Lead Time ( month ) 0.5 2 2 Lead time std deviation ( month ) 0.5 1 2
Explain why it is not necessary to include product cost (price or price time quanity in the EOQ model, but the quantity discount model requires this information ?
A large distributor of oil-well drilling equipment operated over the past two years with EOQ policies based on an annual holding cost rate of 22%. Under the EOQ policy, a particular product has been ordered with a Q* 80. A recent evaluation of holding costs shows that because of an increase in the interest rate associated with bank loans, the annual holding cost rate should be 27%. a. What is the new economic order quantity for the product? b. Develop a general expression showing how the economic order quantity changes when the annual holding cost rate is changed from I to I
(a) Ignoring taxation, calculate the optimum order level of inventory over a one-year planning period using the EOQ model. (b) Estimate the level of safety inventory that should be carried by Toyzrfun Ltd. (c) If Toyzrfun Ltd were to be offered a quantity discount by its suppliers of 1% for orders of 30 000 units or more, evaluate whether it would be beneficial for the company to take advantage of the quantity discount. Assume for this calculation that no safety inventory is carried. (d) Estimate the expected total annual costs of inventory management if the EOQ had been (i) 50% higher, and (ii) 50% lower than its actual level. Comment upon the sensitivity of total annual costs to changes in the EOQ.

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