A hotel purchases 8,000 gallons of a cleaning product. Each gallon costs $10 and the cost of holding one gallon for a year is estimated to be $3. The ordering cost amounts to $30 per order. If the hotel orders in lots of 500 gallons, how many orders does it place each year? What are the ordering and holding costs, and total annual cost? If the economic ordering quantity is used, how much improvement in cost will result?

A hotel purchases 8,000 gallons of a cleaning product. Each gallon costs $10 and the cost of holding one gallon for a year is estimated to be $3. The ordering cost amounts to $30 per order. If the hotel orders in lots of 500 gallons, how many orders does it place each year? What are the ordering and holding costs, and total annual cost? If the economic ordering quantity is used, how much improvement in cost will result?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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