Reference no: EM132320706

You are the owner of Pueblo Powerful Pizza. One of your functions is to minimize your cost for the cardboard pizza boxes, for which you have the following information: each box costs $0.25, holding cost is 67% of the price, ordering cost is $20/order, and you estimate a constant demand of 20,000 boxes/year. You would minimize total cost by purchasing the EOQ quantity each time you place an order, assuming no quantity discounts are available.

a. What is the EOQ quantity?

b. What is the total cost per year if you used the EOQ quantity from part a?

c. How many orders per year, on average, will be placed?

d. If the lead time is 5 days (with 365 days per year), what is the reorder point?

e. How many days will there be between orders (with 365 days per year)?

f. You decide that the time between orders is too long, and you would prefer to order just enough to last 1 week (7 days, and there are 52 weeks and 365 days per year), and you will place an order every week. How much will you order each week to cover just one week's demand?

g. Continuing part f, calculate the total cost of the weekly plan and determine the additional cost compared to the EOQ cost from part b?

h. You decide that the additional cost from part g is not acceptable, so you consider quantity discounts, for which you have found a supplier.  She will sell you the boxes at the following quantity discount pricing: 1 to 9999 boxes at $0.25 per box; 10,000 to 19,999 boxes at $0.20 per box; and 20,000 and over at $0.18 per box. What quantity will result in the least total cost? Use the same data from earlier in this problem: holding cost is 67% of the price, ordering cost is $20/order, and you estimate a constant demand of 20,000 boxes/year. Show all work for partial credit. Zero points if only answers listed, even if correct. Proper methodology is required to earn any credit.