Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Question 1
The Jelly Bean operation holds an inventory of food colouring which used to colour the jelly beans. The jelly bean operation is interested in calculating the optimal ordering strategy for food colouring. Suppose the annual forecast for the necessary food colouring during a normal year of operation is 13491 litres per year. Furthermore, suppose the holding cost per litre of paint is $11.4 and every time the jelly bean operation issues an order to their supplier, a charge of $451 is added to the invoice as an ordering cost. The supplier charges $5.63 per litre of food colouring. Using the Economic Order Quantity formula, what is the optimal order size that minimises total cost (in Litres of food colouring per order)?
a. 1265 litres b. 736 litres c. 1067446 litres d. 26 litres e. 1033 litres
Question 2
Using the Economic Order Quantity formula and the data provided above, how many orders will have to be made in a single year? The choices below are all rounded to the nearest integer.
a. 18 orders b. 15 orders c. 519 orders d. 13 orders e. 79 orders
Question 3
Using the Economic Order Quantity and the data provided above, how much will need be the total annual cost? Hint: account for (i) the price paid for every litre throughout the year purchased from the supplier, (ii) holding cost of your average inventory, and (iii) the ordering cost for all the orders throughout the year.
a. $87732 b. $11778 c. $25269 d. $82360 e. $81843
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