BERNARDS COMPANY LTD is a PRODUCER of fruit juices. The company has an annual demand of 150,000 barrels. The barrels cost $30 each. Fresh supplies can be obtained immediately, but ordering cost and the cost of carriage inwards are $400 per order. The annual cost of holding one barrel in inventory is estimated to be $3.50. The economic order quantity has been calculated to be 10,500 barrels. The suppliers introduce a quantity discount of 5% on orders of at least 12,000 barrels and 5.5% on orders of at least 15,000 barrels. You are required to: Determine whether the least cost order quantity is still the EOQ of 10,500 barrels.

BERNARDS COMPANY LTD is a PRODUCER of fruit juices. The company has an annual demand of 150,000 barrels. The barrels cost $30 each. Fresh supplies can be obtained immediately, but ordering cost and the cost of carriage inwards are $400 per order. The annual cost of holding one barrel in inventory is estimated to be $3.50. The economic order quantity has been calculated to be 10,500 barrels. The suppliers introduce a quantity discount of 5% on orders of at least 12,000 barrels and 5.5% on orders of at least 15,000 barrels. You are required to: Determine whether the least cost order quantity is still the EOQ of 10,500 barrels.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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