OPERATIONS+SUPPLY CHAIN...:CORE >INTL<
OPERATIONS+SUPPLY CHAIN...:CORE >INTL<
5th Edition
ISBN: 9781260547627
Author: Jacobs
Publisher: MCG
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 20, Problem 34OQ

a)

Summary Introduction

To determine: The optimal order quantity of cotton.

a)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine the optimal order quantity of cotton:

Setup cost (S) is given as $100.

Total demand=3 colors×12 months×3,000 units×0.5 pound=54,000

Total purchasing cost=$2.5+$0.20=$2.70

Holding cost=2.70×20%=$0.54

Q=(2)(54,000)(100)0.54=4,472 pounds

Hence, the optimal order quantity of cotton is 4,472 pounds.

b)

Summary Introduction

To determine: How frequently the firm should order.

b)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine how frequently the firm should order:

Number of orders per year=Total demandEOQ=54,0004,472=12.08

Hence, the firm would order 12.08 times a year and 0.99 times (12÷12.08) a month.

c)

Summary Introduction

To determine: The time the firm should place the order when they need the order on April 1.

c)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine the time the firm should place the order when they need the order on April 1:

It is given that the lead time is 2 weeks. Hence, the firm should order the cotton two weeks before in order to receive it on 1st April. It is about March 15.

d)

Summary Introduction

To determine: The number of orders to be placed during the next year.

d)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine the number of orders to be placed during the next year:

Number of orders per year=Total demandEOQ=54,0004,472=12.08

Hence, the number of orders to be placed during the next year is 12.08.

e)

Summary Introduction

To determine: The resulting annual holding cost.

e)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine the annual holding cost:

Annual holding cost=H×Q2=0.54×4,4722=$1,207per year

Hence, the annual holding cost is $1,207.

f)

Summary Introduction

To determine: The resulting annual ordering cost.

f)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine the annual ordering cost:

Annual ordering cost=Number of orders×Ordering cost=12.08×100=$1,208

Hence, the annual ordering cost is $1,208.

g)

Summary Introduction

To determine: The way the change in annual interest cost would influence the optimal batch size, average inventory, and an annual number of orders.

g)

Expert Solution
Check Mark

Explanation of Solution

Given information:

The monthly demand of each color (red, blue, and white) T-shirts is 3,000 units. 0.5 pounds of cotton is required for each shirt and the purchasing price is given as $2.50. transportation cost by sea is $0.20, the lead time is 2 weeks, ordering cost is $100, and the annual interest rate is 20 percent.

Determine the way the change in annual interest cost would influence the optimal batch size, average inventory, and an annual number of orders:

If the annual interest cost reduced to 5 percent, the holding cost would be lower. Hence, the batch size and average inventory would be larger and the number of orders would be smaller.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 20 Solutions

OPERATIONS+SUPPLY CHAIN...:CORE >INTL<

Ch. 20 - Prob. 1OQCh. 20 - Almost certainly you have seen vending machines...Ch. 20 - Prob. 3OQCh. 20 - Prob. 4OQCh. 20 - Prob. 5OQCh. 20 - Prob. 6OQCh. 20 - Wholemark is an Internet order business that sells...Ch. 20 - Prob. 8OQCh. 20 - Prob. 9OQCh. 20 - Prob. 10OQCh. 20 - Prob. 11OQCh. 20 - Ray’s Satellite Emporium wishes to determine the...Ch. 20 - Dunstreet’s Department Store would like to develop...Ch. 20 - Charlie’s Pizza orders all of its pepperoni,...Ch. 20 - Given the following information, formulate an...Ch. 20 - Lieutenant Commander Data is planning to make his...Ch. 20 - Jill’s Job Shop buys two parts (Tegdiws and...Ch. 20 - Demand for an item is 1,000 units per year. Each...Ch. 20 - The annual demand for a product is 15,600 units....Ch. 20 - Daily demand for a product is 100 units, with a...Ch. 20 - Item X is a standard item stocked in a company’s...Ch. 20 - Annual demand for a product is 13,000 units;...Ch. 20 - Gentle Ben’s Bar and Restaurant uses 5,000 quart...Ch. 20 - Prob. 24OQCh. 20 - Daily demand for a product is 60 units with a...Ch. 20 - University Drug Pharmaceuticals orders its...Ch. 20 - Sarah’s Muffler Shop has one standard muffler that...Ch. 20 - Prob. 28OQCh. 20 - Prob. 29OQCh. 20 - It is your responsibility, as the new head of the...Ch. 20 - Prob. 31OQCh. 20 - A local service station is open 7 days per week,...Ch. 20 - Dave’s Auto Supply custom mixes paint for its...Ch. 20 - Prob. 34OQCh. 20 - Demand for a book at Amazon.com is 250 units per...Ch. 20 - Palin’s Muffler Shop has one standard muffler that...Ch. 20 - Daily demand for a certain product is normally...Ch. 20 - A particular raw material is available to a...Ch. 20 - CU, Incorporated (CUI), produces copper contacts...Ch. 20 - In the past, Taylor Industries has used a...Ch. 20 - Alpha Products, Inc., is having a problem trying...Ch. 20 - DAT, Inc., produces digital audiotapes to be used...Ch. 20 - Prob. 1AECh. 20 - Analytics Exercise: Inventory Management at...Ch. 20 - Analytics Exercise: Inventory Management at...Ch. 20 - Prob. 4AECh. 20 - Prob. 5AECh. 20 - Prob. 1PECh. 20 - Prob. 2PECh. 20 - Prob. 3PECh. 20 - Prob. 4PECh. 20 - Prob. 5PECh. 20 - Prob. 6PECh. 20 - Prob. 7PECh. 20 - Prob. 8PECh. 20 - Prob. 9PECh. 20 - Prob. 10PECh. 20 - Prob. 11PECh. 20 - Prob. 12PECh. 20 - Prob. 13PECh. 20 - Prob. 14PE
Knowledge Booster
Background pattern image
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Text book image
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Text book image
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
Text book image
Business in Action
Operations Management
ISBN:9780135198100
Author:BOVEE
Publisher:PEARSON CO
Text book image
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Text book image
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY