My Kitchen Delights (MKD), a regional producer ofgourmet jams and jellies, uses approximately 24,000 glass jarseach month during its production. Because of space limitations,MKD orders 5000 jars at a time. Monthly holding cost is $0.08 perjar, and the ordering cost is $60 per order. Th e company operates20 days per month.(a) What penalty cost is the company incurring by its presentreplenishment policy?(b) MKD would prefer to order eight times each month butneeds to justify any change in order size. How muchwould ordering cost need to be reduced to justify a lot sizeof 3000 jars?(c) If MKD can reduce its ordering cost to $30, what is theoptimal replenishment order quantity?
My Kitchen Delights (MKD), a regional producer ofgourmet jams and jellies, uses approximately 24,000 glass jarseach month during its production. Because of space limitations,MKD orders 5000 jars at a time. Monthly holding cost is $0.08 perjar, and the ordering cost is $60 per order. Th e company operates20 days per month.(a) What penalty cost is the company incurring by its presentreplenishment policy?(b) MKD would prefer to order eight times each month butneeds to justify any change in order size. How muchwould ordering cost need to be reduced to justify a lot sizeof 3000 jars?(c) If MKD can reduce its ordering cost to $30, what is theoptimal replenishment order quantity?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Question
My Kitchen Delights (MKD), a regional producer of
gourmet jams and jellies, uses approximately 24,000 glass jars
each month during its production. Because of space limitations,
MKD orders 5000 jars at a time. Monthly holding cost is $0.08 per
jar, and the ordering cost is $60 per order. Th e company operates
20 days per month.
(a) What penalty cost is the company incurring by its present
replenishment policy?
(b) MKD would prefer to order eight times each month but
needs to justify any change in order size. How much
would ordering cost need to be reduced to justify a lot size
of 3000 jars?
(c) If MKD can reduce its ordering cost to $30, what is the
optimal replenishment order quantity?
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