Reference no: EM132286619
Best Buy sells three models of computers, the LP 1096, the MP 2021, and the HP 321x.
Annual demands for the three products are:
DL = 15,000 for the LP 1096
DM = 2,000 units for the MP 2021, and
DH = 500 units for the HP 321x.
The supplier charges Best Buy $500 for one unit of each model. Best Buy incurs an annual holding cost of 20 percent.
Regardless of the number of different type of products in an order, a fixed transportation cost of $4,000 is incurred each time an order is delivered.
For each model ordered and delivered on the same truck, an additional fixed cost of $1,000 per model is incurred for handling.
(h) If Best Buy decides to order all three products together, what will be the ordering cost per order?
(i) If Best Buy decides to aggregate products, how many orders in a year will Best Buy place?
(j) What will be the order size for each product, within such an aggregate order?
(k) What is the average inventory of each product, when ordered together?
(l) What is the annual holding cost for each product when ordered together?
(m) What is Best Buy's total annual ordering cost, when ordering three products together
(n) What is the total cost, across the three products, when orders are aggregated?
(o) Does Best Buy save anything by placing aggregate orders? If yes, how much?
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