Reference no: EM132320507
1. A restaurant maintains an inventory of disposable napkins. They use 45000 of these napkins annually, which cost $0.20 each. The holding rate is 10% annually and the fixed ordering cost is $25.
a. Calculate the optimal economic order quantity (EOQ). Show all work.
b. About how often will orders be placed (in weeks)? Show all work.
c. How many orders will be placed per year? Show all work.
At an office products company, inventory is kept of Keurig coffee pods. Boxes of breakfast blend pods cost the company $5.50; they sell each box for $9.00. Last year, demand for this product was 72 boxes per week, evenly spaced throughout the year. This demand is expected to continue in the future. The holding cost rate is estimated to be 20% annually. The shipping and other ordering costs is $40 per order.
a. If the company used a fixed order quantity model, calculate the optimal economic order quantity (EOQ). Show all work.
b. If management decided to order the boxes of breakfast blend pods on a weekly basis (one order per week), how much more would it cost the company per year (using just ordering and holding costs)? Show all work.
3. Consider a convenience store that is open 24/7 and stocks paper towel rolls. Each roll of paper towels sells for $2.25. The paper towel vendor sells the convenience store rolls based on the quantity purchased. The purchase price for the store is $1.25 if the order quantity is less than 500 rolls, $1.15 if the order quantity if at least 500 rolls but less than 1000 rolls, and $1.05 is the order quantity if 1000 rolls or greater. The average demand for paper towel rolls is 12.5 rolls per day, and stays at this rate throughout the year. The ordering cost is $15 per order and the annual holding cost rate is estimated to be 35%.
a. If the company used a fixed order quantity model, calculate the optimal economic order quantity (EOQ). Show all work.
b. About how often will orders be placed (in days)? Show all work.
4. Consider a yoga studio that sells yoga mats. Each yoga mat costs the studio $10.25 if it purchases less than 50 in a single order. If the studio purchases at least 50 but less than 100, the cost is $10.00 per mat. If the studio purchases at least 100 but less than 400, the cost is $9.75 per mat. Finally, if the studio purchases at least 400 mats, the cost is $9.25 per mat. Demand for each mat is estimated to be 540 annually, evenly spaced throughout the year. The ordering costs is $50 per order. The holding cost rate is estimated to be 40% annually.
a. If the company used a fixed order quantity model, calculate the optimal economic order quantity. Show all work.
b. If management decided to order yoga mats on a monthly basis (one order per month), how much more would it cost the company? Show all work.