Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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A wholesale store buys 500 of their most popular coffee mugs each month. The cost of ordering
and receiving shipments is $12 per order. Accounting estimates annual carrying costs are $3.60.
The supplier lead time is 2 operating days. The store operates 240 days per year. Each order is
received from the supplier in a single delivery. There are no quantity discounts.
Use 2 decimal places in your calculations (if needed) and then round your final answer to the
closest whole number.
a. What quantity should the store order with each order?
(show your work in the space below)
b. How many times per year will the store order?
(show your work in the space below)
c. How many days will elapse between two consecutive orders?
(show your work in the space below)
d. What is the reorder point if the company wishes to carry a safety stock of 10 mugs?
(show your work in the space below)
e. What is the store’s total annual cost of placing orders & carrying inventory?
(show your work in the space below)
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