Acompany uses 2,000 units of a product each year (constant usage). The product is purchased from a supplier at a unit cost of $4; however, the company must pay the freight from the splir's plant, Each unit weighs 5 pounds; the shpping cost is 20 cents per pound. The company estimates the ordrprocessg cost is $25 per order; inventory holding costs are 20 percent per dollar per year. 1. Find the optimal order quantity,

Acompany uses 2,000 units of a product each year (constant usage). The product is purchased from a supplier at a unit cost of $4; however, the company must pay the freight from the splir's plant, Each unit weighs 5 pounds; the shpping cost is 20 cents per pound. The company estimates the ordrprocessg cost is $25 per order; inventory holding costs are 20 percent per dollar per year. 1. Find the optimal order quantity,

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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My Kitchen Delights (MKD), a regional producer ofgourmet jams and jellies, uses approximately 24,000 glass jarseach month during its production. Because of space limitations,MKD orders 5000 jars at a time. Monthly holding cost is $0.08 perjar, and the ordering cost is $60 per order. Th e company operates20 days per month.(a) What penalty cost is the company incurring by its presentreplenishment policy?(b) MKD would prefer to order eight times each month butneeds to justify any change in order size. How muchwould ordering cost need to be reduced to justify a lot sizeof 3000 jars?(c) If MKD can reduce its ordering cost to $30, what is theoptimal replenishment order quantity?
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