A company uses a special widget (SP) in its production process. Thecompany uses 100 SP units per month in a fairly uniform productionprocess. Each SP unit costs R30. Due to the stringent controlsassociated with the ordering of the widget the order cost is R300 perorder. The widget requires special handling and refrigeration and thecost of holding inventory is estimated to be R200 per unit year. Whichorder size would you recommend that the company use?Suppose the supplier of the special widget offers the company areduced purchase price of R29/widget, but they need to order 100 ormore at a time. Would you recommend that the company accept thisoffer?Annual demandInventory carrying costOrder costPurchase price1200 widgets (100 x 12)R200/widgetR300/orderR30/widget

Given data, Annual demand=Monthly uniform demand×Total number of months in a year Annual…

Answered: A company uses a special widget (SP) in…

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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A company stocks an item that is consumed at the rate of 30 units each day. Every time an order is placed for new supply, $ 120 must be paid. A unit inventory held in stock for one week will cost $ 0.14. What is the total annual cost if the order quantity is 200 more than EOQ? What is the optimum number of orders (rounded to the closest integer) that the company has to place each year? Assume that the company has a standing policy of not allowing shortages in demand.
A company has an annual demand of 2500 units. The cost to place an order to replenish inventory is SR18.75 per order, and annual inventory holding cost per unit is SR1.5. On average, delivery of an order takes 3 working days (Lead time). Assume the store is open 250 days per year. What is the optimal order size? What is the optimal number of orders per year? What is the optimal number of days between orders? What is the Reorder Point (ROP)? What is the Reorder Point (ROP) with 2 days safety stock.
A company has a chance to reduce their inventory ordering costs by placing larger quantity orders using the discount schedule below. What should their optimal order quantity be if this company purchases this single inventory item with an e-mail ordering cost of $4, an annual holding cost rate (per unit) of 2% of the price/unit, and an annual demand of 10,000 units? Order quantity (units) Price/unit ($) 0 to 2,499 1.20 2,500 to 3,999 1.00 4,000 or more 0.98
. Custom Computers, Inc. assembles custom home computersystems. Th e heat sinks for the central processing units are boughtfor $12 each and are ordered in quantities of 1300 units. Annualdemand is 5200 heat sinks, the annual inventory holding cost is$3 per unit, and the cost to place an order is estimated to be $50.Assume that demand occurs continuously through the year andthat a new order is placed in time so the order arrives at the sametime as the previous inventory runs out.(a) Construct a base-case spreadsheet model to help analyzediff erent order quantities. Th e primary output of interestis the total annual inventory-related cost, comprisingtotal ordering cost and total holding cost. Holding costcan be applied to the average inventory level through theyear. Given the assumption about continuously occurringdemand and that orders arrive just in time, the averageinventory level will be half of the order quantity.(b) For the base-case order quantity of 1300 heat sinks, whatis the…
Assume that Triksi Co. makes footballs and is trying to determine the quantity of leather it should order every time an order is placed. The relevant information is as follows: I. Over the course of a year 12,000 square meters of leather will be needed, II. The cost of storing 1 square meter of leather is $3, and III. The cost of placing an order is $450 Show Computations and Explanations. A. What is the EOQ? (Formula: 1,111)
Diskup produces a variety of personal computer products. High-density 3.5-inch disksare produced at a rate of 1,800 per day and are shipped out at a rate of 800 per day. Thedisks are produced in batches. Each disk costs the company 20 cents, and the holdingcosts are based on an 18 percent annual interest rate. Shortages are not permitted. Eachproduction run of a disk type requires recalibration of the equipment. The companyestimates that this step costs $180.a. Find the optimal size of each production run and the time between runs
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XYZ Inc. needs 400 kgs of a material per month. It costs OMR 100 to make and receive an order, and it takes 12 workdays to receive it. The annual holding cost is 15 % of purchase price. The price OMR 1 per kg. The company is operating workdays per week in a 52-week year. At what level of inventory in Kgs should the company be placing orders ? Round-up to the nearest integer
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A company has a demand for 25,750 units annually. The holding cost is 33% of the item cost which is $10.00. The ordering or set-up cost is $250.00 per order and the lead time is 5 days. Assume that there are 350 days per year Suppose a price break of $50 per order is offered for purchase quantities of 2,000 or greater. Question: What is the reorder point for this inventory strategy? What is the inventory position immediately after an order is placed for the inventory strategy that you have selected?

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