Production and Operations Analysis, Seventh Edition
7th Edition
ISBN: 9781478623069
Author: Steven Nahmias, Tava Lennon Olsen
Publisher: Waveland Press, Inc.
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 4, Problem 35AP
Summary Introduction
Interpretation:The supplier that should be used from the available two options is to be determined.
Concept introduction: Economic order quantity refers to the ideal quantity which an organization should order in order to minimize inventory costs.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from two suppliers, A and B. A offers the following all-units discount schedule: (given)
whereas B offers the following incremental discount schedule: $1.25 per pound for all orders less than or equal to 700 pounds, and $1.05 per pound for all incremental amounts over 700 pounds. Assume that the cost of order processing for each case is $150. Which supplier should be used?
A large producer of household products purchases a glyceride used in one of its
deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate
of 40 pounds per month, and the company uses a 23 percent annual interest rate to
compute holding costs. The chemical can be purchased from two suppliers, A and B. A
offers the following all-units discount schedule:
Order Size
Price per Pound
0
The book and paper store also distributes a city guidebook that is ordered from the publisher when needed. The purchase cost is $60. and the store must assume a lead - time of three months from the order is placed and the guidebooks arrive. The store reckon for an annual interest rate of 20 % to compute holding costs, and estimates a cost of $40. for a lost sale if the guidebook is requested when they are out of stock. The expense of placing an order is set to $100.The demand of the guidebook can vary a great deal, but the average during a three - month period has been calculated to 125. The demand can be described by a normal distribution and the standard deviation is 15. Find the optimal value of the lot size, Q, and the reorder point, R, in this case.
Chapter 4 Solutions
Production and Operations Analysis, Seventh Edition
Ch. 4.4 - Prob. 1PCh. 4.4 - Prob. 2PCh. 4.4 - Prob. 3PCh. 4.4 - Prob. 4PCh. 4.4 - Prob. 5PCh. 4.4 - Prob. 6PCh. 4.4 - Prob. 7PCh. 4.4 - Prob. 8PCh. 4.4 - Prob. 9PCh. 4.5 - Prob. 10P
Ch. 4.5 - Prob. 11PCh. 4.5 - Prob. 12PCh. 4.5 - Prob. 13PCh. 4.5 - Prob. 14PCh. 4.5 - Prob. 15PCh. 4.5 - Prob. 16PCh. 4.6 - Prob. 17PCh. 4.6 - Prob. 18PCh. 4.6 - Prob. 19PCh. 4.6 - Prob. 20PCh. 4.7 - Prob. 21PCh. 4.7 - Prob. 22PCh. 4.7 - Prob. 23PCh. 4.7 - Prob. 24PCh. 4.7 - Prob. 25PCh. 4.8 - Prob. 26PCh. 4.8 - Prob. 27PCh. 4.8 - Prob. 28PCh. 4.9 - Prob. 29PCh. 4.9 - Prob. 30PCh. 4 - Prob. 31APCh. 4 - Prob. 32APCh. 4 - Prob. 33APCh. 4 - Prob. 34APCh. 4 - Prob. 35APCh. 4 - Prob. 36APCh. 4 - Prob. 37APCh. 4 - Prob. 38APCh. 4 - Prob. 39APCh. 4 - Prob. 40APCh. 4 - Prob. 41APCh. 4 - Prob. 42APCh. 4 - Prob. 43APCh. 4 - Prob. 44APCh. 4 - Prob. 45AP
Knowledge Booster
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.Similar questions
- The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardYou are a purchasing manager in charge of stocking a certain type of product. Weekly demand for these products is normally distributed, with a mean of 100 and a standard deviation of 50. Holding costs are 25%, and you must hold a level of inventory corresponding to a cycle service level of 95%. You are faced with two suppliers, QUALITY Products and BEST Products, who offer the following terms. QUALITY sells the products for €5,000 with a minimum order of 100, and a lead time of 1 week with a standard deviation of 0.1 week. BEST sells the transformer for €4,800, has a minimum batch of 1,000, a lead time of 5 weeks, and a lead-time standard deviation of 4 weeks. If you could use both suppliers, how would you structure your orders? Describe the dimensions of supplier performance that affect total costarrow_forwardA supplier has come to you and offered the following deal. If you buy 29 or fewer cases of cleaning solution, the cost will be $25 for each case. If you buy 30 or more cases, the cost will be $20 per case. Assume your cost of carrying inventory is 15 percent a year, it costs $20 for you to order the material, and you use 50 cases per year.a. How many cases should you order?b. Would you negotiate with this supplier for a further discount? Explain the quantities and prices that you would negotiate for and why those quantities and prices are selected.arrow_forward
- Talisman Games, a local gaming store, stocks the 4th edition of the rulebook of a popular pen- and-paper role-playing game – Daggers and Dungeons. Talisman orders the rulebooks directly from its publisher – Wizards of the Shore (WotS). Talisman orders a rulebook at a wholesale price of $15 and sells it for $20. The lead-time from the supplier is 2 weeks and there is a fixed order cost of $10. Demand for the rulebook each week is independent of demand in previous weeks and is approximately normal with a mean of 4 per week with standard deviation of 3 per week. The owners of the store estimate that their opportunity cost of capital is around 15% per year. If a customer comes looking to buy a rule book but finds Talisman is stocked out, their copy is backordered and picked up when the next shipment arrives at Talisman from WotS. The customers are always eager to pick up their book, so no sales are lost. To reward loyalty, Talisman throws in a free set of dice (worth $2) with every…arrow_forwardMotif is a Turkish electrotechnical company which operates a warehouse in Ankara. The company is currently considering the inventory control of a specialized electronic component in its warehouse. The annual demand for this component is 4000 units. The company applies a holding cost rate of 20% per year and its fixed order costs are 50€ (including transport costs). Over the past years, the company has followed different replenishment order policies. The replenishment order quantities applied so far as well as the associated annual holding costs and annual order costs are shown in the following Table REPLENISHMENT POLICY ORDERS PER YEAR ORDER ORDER QUANTITY ORDER COST (€) HOLDING COST (€) TOTAL COST (€) A 2 2000 100 2500 2600 B 4 1000 200 1250 1450 C 6 667 300 833 1133 Calculate the Economic Order Quantity and evaluate the minimum total yearly costs that the company might achieve and What is the % cost deviation from the…arrow_forwardDemand is 20,000 units per month. The holding cost is 19.6% per year. Each order incurs a fixed cost of $400. a.The supplier offers an all unit discount pricing schema with a price of $5 per unit for orders under 30,000 and a price of $4.9 for all orders of 30,000 or more. How many units should be ordered per replenishment? b.Suppose that the supplier offers a marginal unit discount pricing schema with a price of $5 per unit for the first 30,000 and a price of $4.9 per unit for each unit above 30,000 in an order. How many units should be ordered per replenishment?arrow_forward
- Johnson Tire Plaza (JTP) is a large chain of tire shops, who sells various brand of automobile tires. The yearly demand of a particular brand of time is about 10,821 units per year. JTP purchases these tires from a supplier. The ordering cost is $109 per order and the holding cost is $14.6 per tire per year. The supplier always delivers the shipment within 13 days after receiving a replenishment order from JTP. The company operates 250 days per year. Assume EOQ model is applicable. What is the number of orders per year if JTP uses an order quantity of 1,728 tires? Use at least 4 decimal places.arrow_forwardThe hotels in the town received lead information that there was a huge baseball game coming to town in April. Accordingly, the three properties decided on and implemented the rates to be charged. Rain hotel has been in business for a while and always seeks to have all rooms sold out, hence he charges a reasonable rate. Tourree Resort’s Manager realizes that the game is coming and seeks to maximize on the constrained supply sets a higher rate on the other hand Andulasca Resort positions himself as being competitive and sets what he considers to be a reasonable rate. Each property has 200 rooms Questions What do you think about each property’s approach? Which property do you think received the best revenue? The sale and revenue for each property is outlined as follows: Description Rain Hotel Tourree Resort Andulasca Resort Occupied Rooms 200 78 166 ADR 69 249 149 BAR 69 249 149 Revenue $ 13, 8000…arrow_forwardThe purchasing manager for the Atlantic Steel Company must determine a policy for orderingcoal to operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate,and the firm operates 360 days per year. The purchasing manager has determined that the orderingcost is $80 per order and the cost of holding coal is 20% of the average dollar value of inventoryheld. The purchasing manager has negotiated a contract to obtain the coal for $12 per ton forthe coming year. If 5 days of lead time are required to receive an order of coal, how much coal should be on hand when an order is placed?arrow_forward
- Johnson Tire Plaza (JTP) is a large chain of tire shops, who sells various brand of automobile tires. The yearly demand of a particular brand of time is about 8,888 units per year. JTP purchases these tires from a supplier. The ordering cost is $124 per order and the holding cost is $19 per tire per year. The supplier always deliver the shipment within 6 days after receiving a replenishment order from JTP. The company operates 250 days per year. Assume EOQ model is applicable. What is the optimal annual inventory cost for JTP? Use at least 4 decimal places.arrow_forwardThe purchasing manager for the Atlantic Steel Company must determine a policy for orderingcoal to operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate,and the firm operates 360 days per year. The purchasing manager has determined that the orderingcost is $80 per order and the cost of holding coal is 20% of the average dollar value of inventoryheld. The purchasing manager has negotiated a contract to obtain the coal for $12 per ton forthe coming year. Determine the optimal quantity of coal to receive in each order.arrow_forwardThe purchasing manager for the Atlantic Steel Company must determine a policy for orderingcoal to operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate,and the firm operates 360 days per year. The purchasing manager has determined that the orderingcost is $80 per order and the cost of holding coal is 20% of the average dollar value of inventoryheld. The purchasing manager has negotiated a contract to obtain the coal for $12 per ton forthe coming year. Determine the total inventory-related costs associated with the optimal ordering policy (do not include the cost of the coal).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
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
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY