A Mercedes dealer pays $40,000 for each car purchased (wholesale price). The annual holding cost is estimated to be 30% of the dollar value of inventory. The dealer sells an average of 1200 cars per year. They believe that demand is backlogged but estimate that if they are short one car for one year, the loss in future profits is about 10% of the wholesale price. Each time the dealer places an order for cars, ordering costs amount to $1600. Assume there are 360 work days per year. Question: What percent of the time do shortages occur? I've deduced the percent of shortage time to be 25%, but am not sure I've set up my formulas correctly.

A Mercedes dealer pays $40,000 for each car purchased (wholesale price). The annual holding cost is estimated to be 30% of the dollar value of inventory. The dealer sells an average of 1200 cars per year. They believe that demand is backlogged but estimate that if they are short one car for one year, the loss in future profits is about 10% of the wholesale price. Each time the dealer places an order for cars, ordering costs amount to $1600. Assume there are 360 work days per year. Question: What percent of the time do shortages occur? I've deduced the percent of shortage time to be 25%, but am not sure I've set up my formulas correctly.

Name: A Mercedes dealer pays $40,000 for each car purchased (wholesale price
Uploaded: 2024-03-20T06:57:05.000Z
Channel: Bartleby
Description: A Mercedes dealer pays $40,000 for each car purchased (wholesale price). The annual holding cost is estimated to be 30% of the dollar value of inventory. The dealer sells an average of 1200 cars per year. They believe that demand is backlogged but es

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter10: Introduction To Simulation Modeling

Section10.4: Simulation With Built-in Excel Tools

Problem 14P

See similar textbooks

Similar questions

Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
ABC firm uses roughly 3,400 pounds of chemical dye a year. Currently, the firm purchases 300 pounds per order and pays P120.00 per pound. The supplier has just announced that orders of 1,000 pounds or more will be filled at a price of P80.00 per pound. The manufacturing firm incurs a cost of P4,000.00 each time it submits an order and assigns an annual holding cost of 17% of the purchase price per pound. a. Determine the order size that will minimize the total cost.b. If the supplier offered the discount at 1,500 pounds instead of 1,000 pounds, what order size would minimize total cost?
A Mercedes dealer must pay $20,000 for each carpurchased. The annual holding cost is estimated to be 25%of the dollar value of inventory. The dealer sells an averageof 500 cars per year. He believes that demand is backloggedbut estimates that if he is short one car for one year he willlose $20,000 worth of future profits. Each time the dealerplaces an order for cars, ordering cost amounts to $10,000.Determine the Mercedes dealer’s optimal ordering policy.What is the maximum shortage that will occur?
One of the products stocked at Weiss’s paint store, mentioned in Problem 14, is a certain type of highly volatile paint thinner that, due to chemical changes in the product,has a shelf life of exactly one year. Al Weiss purchases the paint thinner for $20 a galloncan and sells it for $50 a can. The supplier buys back cans not sold during the yearfor $8 for reprocessing. The demand for this thinner generally varies from 20 to 70cans a year. Al assumes a holding cost for unsold cans at a 30 percent annual interestrate.a. Assuming that all values of the demand from 20 to 70 are equally likely, what is theoptimal number of cans of paint thinner for Al to buy each year?b. More accurate analysis of the demand shows that a normal distribution gives abetter fit of the data. The distribution mean is identical to that used in part (a), andthe standard deviation estimator turns out to be 7. What policy do you nowobtain?
Solve this please theoretically not on excel A detergent manufacturer manages a plant for a major retail. The average monthly demand is 12,000 jugs of detergent. Each jug costs $(1.3) and is sold to the retailer at a wholesale price of $8. The manufacturer and the retailer use an annual holding cost of (29)%. For each order placed, the retailer incurs an ordering cost of $80. Manufacturer incurs the cost of transportation and loading which totals $2,000 per order shipped. a. To minimize its inventory-related costs, what lot size will be the best for the retailer? What is the annual inventory-related cost of the manufacturer and the retailer as a result of this policy? b. What lot size minimizes the inventory-related costs across both the manufacturer and the retailer? How much reduction in cost relative to (a) results from this policy? c. Design an all-unit quantity discount that results in the retailer ordering the quantity in (b
An electronics retailer sells laptops at a steady rate of 7,500 per quarter. It costs the manufacturer $350 tomake each laptop, and they charge $400/laptop to the retailer. The manufacturer produces the laptop at asteady rate that matches demand, and incurs a fixed cost of $2,800 to fulfill each retail order. Both theretailer and the manufacturer have an annual holding cost percentage of 20%. The retailer places 10orders with the laptop manufacturer each quarter (which it determined from an EOQ calculation). Whatare the retailer’s and manufacturer’s costs under this current setup, as well as the total supply chain cost?
An electronics retailer sells laptops at a steady rate of 7,500 per quarter. It costs the manufacturer $350 tomake each laptop, and they charge $400/laptop to the retailer. The manufacturer produces the laptop at asteady rate that matches demand, and incurs a fixed cost of $2,800 to fulfill each retail order. Both theretailer and the manufacturer have an annual holding cost percentage of 20%. The retailer places 10orders with the laptop manufacturer each quarter (which it determined from an EOQ calculation). Whatare the retailer’s and manufacturer’s costs under this current setup, as well as the total supply chain cost?What quantity discount should the manufacturer offer the retailer in order to minimize the total supplychain costs? Under this quantity discount, what are the new retailer and manufacturer costs? Does theretailer choose to use the quantity discount? PLEASE SHOW ALL CALUCALTIONS/EXCEL MODEL
A Mercedes dealer must pay $20,000 for each car purchased. The annual holding cost is estimated to be 25% of the dollar value of inventory. The dealer sells an average of 500 cars per year. He considers the lawsuit to be behind schedule but estimates that if he is short on one car in one year he will lose $20,000 worth of future profits. Each time the dealer places an order for automobiles, the ordering cost adds up to $10,000. Determine the distributor's optimal ordering policy. What is the maximum deficit that will occur? What is the total annual cost?
The home appliance department of a large department store is using inventory models to controlthe replenishment of a particular model of Microwave ovens. The daily demand follows anormal distribution with a mean of 150 units and standard deviation of 16 units. The store pays$100 for each oven. Fixed costs of replenishment are $28. The accounting departmentrecommends a 20% annual holding cost rate. Assume that the average lead time is 5 days with astandard deviation of 1 day. Assume 365 days a year.Part A: What is the EOQ?Part B: What is the reorder point if the maximum chance of 5% of stock out (i.e. 95% servicelevel) is desired?Part C: What is the reorder point if a fill rate of 99% is required?Part D: Suppose management wants to simplify the process by setting the reorder point to“1000” units. Based on this policy, what is the implied chance of stock out?
A car dealer must pay $20,000 for each car purchased. The annual holding cost is estimated to be 25% of the dollar value of inventory. The dealer sells an average of 500 cars per year. He is willing to backlog some demand but estimates that if he is short one car for one year, he will lose $20,000 worth of future profits. Each time the dealer places an order for cars, the ordering cost is $10,000. Determine the dealer’s optimal ordering policy. What is the maximum shortage that will occur? Assume it costs $5000 to store a car for a year
Parasol Systems sells motherboards for personal computers. For quantities upthrough 25, the firm charges $350 per board; for quantities between 26 and 50,it charges $315 for each board purchased beyond 25; and it charges $285 eachfor the additional quantities over 50. A large communications firm expects torequire these motherboards for the next 10 years at a rate of at least 140 peryear. Order setup costs are $30 and holding costs are based on an 18 percentannual interest rate. What should be the size of the standing order?
A distributor of computer monitors purchases the monitors from an overseas supplier under a continuous review system. The average demand for a popular computer monitor is normally distributed with a mean of 50 units a day and a standard deviation of 10 units a day. It costs $75 to process each order and there is a 16 day lead time. The holding cost for each monitor is $20 per year and the distributor wishes to maintain a 90% service level. The distributor operates 300 days in a year. The distributor would like to use a periodic review inventory system to manage their inventory. Use the information in Scenario 9.15. What is the target inventory level needed to achieve a 90% service level? greater than 1250 units but less than or equal to 1500 units less than or equal to 1000 units greater than 1000 units but less than or equal to 1250 units greater than 1500 units