How much is the EOQ for each quantity discount? How much should be the EOQ?
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ESTRELLA is a bike retailer located in the outskirts of Bacolod City. ESTRELLA purchases bikes from STORAGEHUB in orders of 250 bikes which is the current economic order quantity. STORAGEHUB is now offering the following bulk discounts to its customers: Price
- 0% discount on orders less than 499 P3,500
- 10% discount on orders above 500 units - 999 3,150
- 15% discount on orders above 1,000 units 2,975
ESTRELLA is wondering if the EOQ model is still the most economical and whether increasing the order size would actually be more beneficial. Following information is relevant to forming the decision:
- Annual demand is 5000 units
- Ordering cost is $100 per order
- Annual holding cost is 25%
How much is the EOQ for each quantity discount?
How much should be the EOQ?
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- Explain the most appropriate distribution system that can be used by Pepsi Co Jamaica to reduce order lead time and client delivery lead time. Please provide a justification for your responseCharlie’s Pizza orders all of its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops every four weeks to take orders. Because the orders are shipped directly from Italy, they take three weeks to arrive. Charlie’s Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 30 pounds. Charlie’s prides itself on offering only the best quality ingredientsand a high level of service, so it wants to ensure a 98 percent probability of not stocking out on pepperoni. Assume that the sales representative just walked in the door and there are currently 500 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order? (Answer in Appendix D)Retailers Warehouse (RW) is an independent supplier of household items todepartment stores. RW attempts to stock enough items for a 98 percent serviceprobability.A stainless steel knife set is one item it stocks. Demand (2,400 sets peryear) is relatively stable over the entire year. Whenever new stock isordered, a buyer must assure that numbers are correct for stock on handand then phone in a new order. The total cost involved to place an order isabout $5. RW figures that holding inventory in stock and paying forinterest on borrowed capital, insurance, and so on adds up to about $4holding cost per unit per year.Analysis of the past data shows that the standard deviation of demandfrom retailers is about four units per day for a 365-day year. Lead time toget the order is seven days.a. What is the economic order quantity?b. What is the reorder point?
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