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1. Determine the inventory order quantity for Diamant’s distributor. 2. Compare the optimal order quantity with a seasonally adjusted forecast for demand. Does the order quantity seem adequate to meet the seasonal demand pattern for Diamonds (i.e., is it likely that shortages or excessive inventories will occur)?

1. Determine the inventory order quantity for Diamant’s distributor. 2. Compare the optimal order quantity with a seasonally adjusted forecast for demand. Does the order quantity seem adequate to meet the seasonal demand pattern for Diamonds (i.e., is it likely that shortages or excessive inventories will occur)?

Practical Management Science
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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1. Determine the inventory order quantity for Diamant’s distributor.
2. Compare the optimal order quantity with a seasonally adjusted forecast for demand. Does
the order quantity seem adequate to meet the seasonal demand pattern for Diamonds
(i.e., is it likely that shortages or excessive inventories will occur)?

of filling to produce (including spillage and waste). Diamant Foods orders chocolate, nuts, and filling from its suppliers by the pound. The annual ordering cost is $5,700 for chocolate, and the annual carrying cost is $0.45 per pound. The ordering cost for macadamia nuts is $6,300, and the annual carrying cost is $0.63 per pound. The ordering cost for filling is $4,500, and the annual carrying cost is $0.55 per pound. Each of the suppliers offers the candy manufacturer a quantity discount price schedule for the ingredients, as follows: Chocolate Macadamia Nuts Price Quantity (Ib.) 0-30,000 30,0001- 70,000 Filling Price Quantity (Ib.) Price Quantity (lb.) 0-50,000 50,001- 100,000 100,001- 150,000 150,001+ 3.05 6.50 1.50 0-40,000 40,001- 80,000 2.90 6.25 1.35 2.75 5.95 70,001+ 1.25 80,001+ 2.60
Transcribed Image Text:of filling to produce (including spillage and waste). Diamant Foods orders chocolate, nuts, and filling from its suppliers by the pound. The annual ordering cost is $5,700 for chocolate, and the annual carrying cost is $0.45 per pound. The ordering cost for macadamia nuts is $6,300, and the annual carrying cost is $0.63 per pound. The ordering cost for filling is $4,500, and the annual carrying cost is $0.55 per pound. Each of the suppliers offers the candy manufacturer a quantity discount price schedule for the ingredients, as follows: Chocolate Macadamia Nuts Price Quantity (Ib.) 0-30,000 30,0001- 70,000 Filling Price Quantity (Ib.) Price Quantity (lb.) 0-50,000 50,001- 100,000 100,001- 150,000 150,001+ 3.05 6.50 1.50 0-40,000 40,001- 80,000 2.90 6.25 1.35 2.75 5.95 70,001+ 1.25 80,001+ 2.60
Diamant Foods Company produces various food products, including a line of candies. One of its most popular candy items is Divine Diamonds, a bag of a dozen individually wrapped diamond- shaped candies made primarily from a blend of dark and milk chocolates, macadamia nuts, and a blend of heavy cream fillings. The item is relatively expensive, so Diamant Foods produces it only for its eastern market, encompassing urban areas such as New York, Atlanta, Philadelphia, and Boston. The item is not sold in grocery or discount stores but mainly in specialty shops and specialty groceries, candy stores, and department stores. Diamant Foods supplies the candy to a single food distributor, with several warehouses on the East Coast. The candy is shipped in cases of 60 bags per case. Diamonds sell well, despite being expensive, at $9.85 per bag (wholesale). Diamant uses high-quality, fresh ingredients and does not store large candy stocks in inventory for very long periods. Diamant's distributor believes that demand for the candy follows a seasonal pattem. It has collected demand data (i.e., cases sold) for Diamonds from its warehouses and the stores it supplies for the past three (3) years, as follows: Demand (cases) Year 2 Month Year 1 Year 3 228 January February March 192 212 210 223 231 226 205 260 216 April May June 252 293 228 235 246 172 220 229 July August September October 160 209 217 147 231 226 256 263 302 342 370 260 411 November 251 279 December 273 277 293 The distributor must hold the candy inventory in climate-controlled warehouses and be careful handling it. The annual carrying cost is $116 per case. Diamonds must be shipped a long distance from the manufacturer to the distributor, and to keep the candy as fresh as possible, trucks must be air-conditioned, shipments must be direct, and shipments are often less than a truckload. As a result, the ordering cost is $4,700. Diamant Foods makes Diamonds from three (3) primary ingredients it orders from different suppliers: dark and milk chocolate, macadamia nuts, and a special heavy cream filling. Except for its unique shape, a Diamond is almost like a chocolate truffle. Each Diamond weighs 1.2 ounces and requires 0.70 ounce of blended chocolates, 0.50 ounce of macadamia nuts, and 0.40 ounce
Transcribed Image Text:Diamant Foods Company produces various food products, including a line of candies. One of its most popular candy items is Divine Diamonds, a bag of a dozen individually wrapped diamond- shaped candies made primarily from a blend of dark and milk chocolates, macadamia nuts, and a blend of heavy cream fillings. The item is relatively expensive, so Diamant Foods produces it only for its eastern market, encompassing urban areas such as New York, Atlanta, Philadelphia, and Boston. The item is not sold in grocery or discount stores but mainly in specialty shops and specialty groceries, candy stores, and department stores. Diamant Foods supplies the candy to a single food distributor, with several warehouses on the East Coast. The candy is shipped in cases of 60 bags per case. Diamonds sell well, despite being expensive, at $9.85 per bag (wholesale). Diamant uses high-quality, fresh ingredients and does not store large candy stocks in inventory for very long periods. Diamant's distributor believes that demand for the candy follows a seasonal pattem. It has collected demand data (i.e., cases sold) for Diamonds from its warehouses and the stores it supplies for the past three (3) years, as follows: Demand (cases) Year 2 Month Year 1 Year 3 228 January February March 192 212 210 223 231 226 205 260 216 April May June 252 293 228 235 246 172 220 229 July August September October 160 209 217 147 231 226 256 263 302 342 370 260 411 November 251 279 December 273 277 293 The distributor must hold the candy inventory in climate-controlled warehouses and be careful handling it. The annual carrying cost is $116 per case. Diamonds must be shipped a long distance from the manufacturer to the distributor, and to keep the candy as fresh as possible, trucks must be air-conditioned, shipments must be direct, and shipments are often less than a truckload. As a result, the ordering cost is $4,700. Diamant Foods makes Diamonds from three (3) primary ingredients it orders from different suppliers: dark and milk chocolate, macadamia nuts, and a special heavy cream filling. Except for its unique shape, a Diamond is almost like a chocolate truffle. Each Diamond weighs 1.2 ounces and requires 0.70 ounce of blended chocolates, 0.50 ounce of macadamia nuts, and 0.40 ounce
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