Q.2 AI Muhannad Industrial and Domestic Services, Oman requires on average 4000 sheets of A4 size papers per day at its different office locations in Muscat. Each time the purchase manager orders centrally the A4 size papers, the total expenses incurred to the company are estimated to be 10.6 OMR per order. Presently the company orders 350 reams of papers per order at a flat rate of 2.1 OMR per ream (one ream contains 500 A4 size papers). It takes almost a day for the local supplier to deliver the order. Considering the overall cost of the inventory and the manpower involved, the annual carrying costs for the company is estimated to be 35% of the cost for each ream of the paper. The company operates on 5 days a week over 46 weeks per year. (1) Is the present purchase policy economical for the company? If not, guide the purchase manager in selecting the best economical policy in terms of expected number of orders annually, ordered quantity per order, reorder point and the expected time between the orders, for ordering the A4 size papers.

Q.2 AI Muhannad Industrial and Domestic Services, Oman requires on average 4000 sheets of A4 size papers per day at its different office locations in Muscat. Each time the purchase manager orders centrally the A4 size papers, the total expenses incurred to the company are estimated to be 10.6 OMR per order. Presently the company orders 350 reams of papers per order at a flat rate of 2.1 OMR per ream (one ream contains 500 A4 size papers). It takes almost a day for the local supplier to deliver the order. Considering the overall cost of the inventory and the manpower involved, the annual carrying costs for the company is estimated to be 35% of the cost for each ream of the paper. The company operates on 5 days a week over 46 weeks per year. (1) Is the present purchase policy economical for the company? If not, guide the purchase manager in selecting the best economical policy in terms of expected number of orders annually, ordered quantity per order, reorder point and the expected time between the orders, for ordering the A4 size papers.

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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