Calculate the ordering cost per order

Assignment Help Operation Management

Reference no: EM133595024

Problem

Millennium Liquors is a wholesaler of sparkling wines. Their most popular product is the French Bete Noire. Weekly demand is for 45 cases. Assume demand occurs over 50 weeks per year. The wine is shipped directly from France. Millennium's annual cost of capital is 15 percent, which also includes all other inventory-related costs. Below are relevant data on the costs of shipping, placing orders, and refrigeration.

1. Cost per case: $120
2. Shipping cost (for any size shipment): $290
3. Cost of labor to place and process an order: $10
4. Fixed cost for refrigeration: $75/week

Answer the following:

A. Calculate the weekly holding cost for one case of wine.

B. Calculate the ordering cost (excluding the cost of wines) per order.

C. What is the optimal number of cases per order to minimize the total cost (ordering and inventory) per case?

D. Currently orders are placed by calling France and then following up with a letter. Mil-lennium and its supplier may switch to a simple ordering system using the Internet. The new system will require much less labor. What would be the impact of this system on the ordering pattern?

Reference no: EM133595024

Questions Cloud

Delivery speed is an order-winning factor : Is HP's focus on minimizing inventory costs is feasible for a company operating in a market where delivery speed is an order-winning factor

Realized race and racism existed : Describe how your life was before you realized race and racism existed. How did things change for you after you learned?

What do you believe should be the legitimate ends : what do you believe should be the legitimate ends of such an inquiry? E.g., do you believe that the government should be in the business of distinguishing

Implement solutions to achieve organizational goal : Ability to work collaboratively with others to coordinate work, troubleshoot issues and implement solutions to achieve organizational goals and leverage

Calculate the ordering cost per order : Calculate the ordering cost (excluding the cost of wines) per order. What is the optimal number of cases per order to minimize the total cost per case?

How the production of popular culture relies : How the production of popular culture relies on the collective creativity generated by the social interaction and public life afforded

What the two entities individually held : marketing capabilities to capture a larger market share than what the two entities individually held. What type of integration does this scenario best

How to create the most value for society : Do you consider how to create the most value for society when making decisions in your organization or your personal life? How does that choice impact your

What are the social responsibilities of the company : What are the social responsibilities of the company if it is operating in other countries? To what level of CSR or CSV is the company adhering at the time

User Account

All Pages