Assume that two years have passed, and the purchasing agent mentioned in Problem22 must recompute the optimal number of wafers to purchase and from whichsource to purchase them. Source B has decided to accept any size offer, but sells thewafers for $2.55 each for orders of up to 3,000 wafers and $2.25 each for the incremental amount ordered over 3,000 wafers. Source A still has the same price schedule, and Source C went out of business. Now which source should be used?
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Assume that two years have passed, and the purchasing agent mentioned in Problem
22 must recompute the optimal number of wafers to purchase and from which
source to purchase them. Source B has decided to accept any size offer, but sells the
wafers for $2.55 each for orders of up to 3,000 wafers and $2.25 each for the incremental amount ordered over 3,000 wafers. Source A still has the same price
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- Pricing Decisions at Madison The Madison Company manufactures and retails a certain product. The company wants to determine the price that maximizes its profit from this product. The unit cost of producing and marketing the product is 50. Madison will certainly charge at least 50 for the product to ensure that it makes some profit. However, there is a very competitive market for this product, so that Madisons demand falls sharply when it increases its price. How should the company proceed?2 In the pricing model in Example 7.1 with the constant elasticity demand function, the assumption is that all units demanded are sold. Suppose the company has the capacity to produce only 200 units. If demand is less than capacity, all of demand is sold. If demand is greater than or equal to capacity, only 200 units are sold. Use Solver to find the optimal price and the corresponding profit. Then use SolverTable to see how sensitive these answers are to the production capacity, letting it vary from 170 to 230 in increments of 10. Discuss your findings relative to the original solution in Example 7.1. In other words, what is the effect of capacity on the optimal price and profit?A purchasing agent for a particular type of silicon wafer used in the production ofsemiconductors must decide among three sources. Source A will sell the siliconwafers for $2.50 per wafer, independently of the number of wafers ordered. Source Bwill sell the wafers for $2.40 each but will not consider an order for fewer than3,000 wafers, and Source C will sell the wafers for $2.30 each but will not acceptan order for fewer than 4,000 wafers. Assume an order setup cost of $100 and anannual requirement of 20,000 wafers. Assume a 20 percent annual interest rate forholding cost calculations.c. If the replenishment lead time for wafers is three months, determine the reorderpoint based on the on-hand level of inventory of wafersA purchasing agent for a particular type of silicon wafer used in the production ofsemiconductors must decide among three sources. Source A will sell the siliconwafers for $2.50 per wafer, independently of the number of wafers ordered. Source Bwill sell the wafers for $2.40 each but will not consider an order for fewer than3,000 wafers, and Source C will sell the wafers for $2.30 each but will not acceptan order for fewer than 4,000 wafers. Assume an order setup cost of $100 and anannual requirement of 20,000 wafers. Assume a 20 percent annual interest rate forholding cost calculations.b. What is the optimal value of the holding and setup costs for wafers when theoptimal source is used?
- A purchasing agent for a particular type of silicon wafer used in the production ofsemiconductors must decide among three sources. Source A will sell the siliconwafers for $2.50 per wafer, independently of the number of wafers ordered. Source Bwill sell the wafers for $2.40 each but will not consider an order for fewer than3,000 wafers, and Source C will sell the wafers for $2.30 each but will not acceptan order for fewer than 4,000 wafers. Assume an order setup cost of $100 and anannual requirement of 20,000 wafers. Assume a 20 percent annual interest rate forholding cost calculations.a. Which source should be used, and what is the size of the standing order?Sarah is a buyer for a department store. A supplier offers her a 5 percent discount if shetriples her usual order quantity. Which of the following best explains why Sarah shouldtake the deal?a. Even though the increase in the operating costs is likely to exceed the benefit of the5 percent discount, Sarah feels that her customers expect the lowest possible price.b. Sarah hopes that customers are likely to purchase more if they see an increase in theinventory in the store.c. Sarah knows that even though she may triple her order quantity, this would increaseher operating costs by far less than a factor of three.d. Sarah knows that the sum of operating costs is probably less than 5 percent of thepurchase cost, so an increase in the operating costs is unlikely to be a concern.The Rahway, New Jersey, plant of Metalcase, a manufacturer of office furniture, produces metaldesks at a rate of 200 per month. Each desk requires 40 Phillips head metal screws purchasedfrom a supplier in North Carolina. The screws cost 3 cents each. Fixed delivery charges and costsof receiving and storing shipments of the screws amount to about $100 per shipment, independently of the size of the shipment. The firm uses a 25 percent interest rate to determineholding costs. Metalcase would like to establish a standing order with the supplier and is considering several alternatives. What standing order size should they use?
- The catering manager of La Vista Hotel, LisaFerguson, is disturbed by the amount of silverware she is losing every week. Last Friday night, when her crew tried to set up for a banquet for 500 people, they did not have enoughknives. She decides she needs to order some more silverware,but wants to take advantage of any quantity discounts hervendor will offer.For a small order (2,000 or fewer pieces), her vendorquotes a price of $1.80Ypiece.If she orders 2,001–5,000 pieces, the price drops to$1.60Ypiece. 5,001–10,000 pieces brings the price to$1.40Ypiece, and 10,001 and above reduces the price to $1.25.Lisa’s order costs are $200 per order, her annual holdingcosts are 5%, and the annual demand is 45,000 pieces. For thebest option:a) What is the optimal order quantity?b) What is the annual holding cost?c) What is the annual ordering (setup) cost?d) What are the annual costs of the silverware itself with anoptimal order quantity?e) What is the total annual cost, including ordering,…Consider a hardware supply warehouse that is contractually obligated to deliver 1000units a specialized fastener to a local manufaturing company each week. Each time thewarehouse places an order for these items from its supplier, an ordering and transporationfee off $20 is charged to the warehouse. The warehouse pays $1.00 for each fastener andcharges the local firm $5.00 for each fastener. Annual holding cosst iss 25% off inventoryvalue, or $0.25 per year. The warehouse manager would like to know how much to orderwhen inventory gets to zero.Assume that the warehouse works 50 weeks/year.The bookstore at Tech purchases jackets emblazoned withthe school name and logo from a vendor. The vendor sellsthe jackets to the store for $38 apiece. The cost to the bookstore for placing an order is $120, and the annual car-rying cost is 25% of the cost of a jacket. The bookstore manager estimates that 1700 jackets will be sold during theyear. The vendor has offered the bookstore the followingvolume discount schedule: Order Size Discount1–299 0%300–499 2%500–799 4%800 5% What is the bookstore’s optimal order quantity, given thisquantity discount information?
- 3. Cynthia Knott’s oyster bar buys fresh Louisiana oysters for $5 per pound and sells them for $12 per pound. Any oysters not sold that day are sold to her cousin, who has a nearby grocery store, for $1 per pound. Cynthia believes that demand follows the normal distribution, with a mean of 100 pounds and a standard deviation of 15 pounds. a) What is the cost of underestimating demand for each pound? b) What is the overage cost per pound? c) How many pounds of oyster should she order each day? d) What is the stockout risk for this order size?After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $12,900 price, but financing through the dealer is no bargain. He has $2,500 cash for a down payment, so he needs an $10,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $10,400 for a period of four years at an add-on interest rate of 10 percent. What is the annual percentage rate (APR)?After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $12,900 price, but financing through the dealer is no bargain. He has $2,500 cash for a down payment, so he needs an $10,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $10,400 for a period of four years at an add-on interest rate of 10 percent. What is the total interest on Richard’s loan? What is the total cost of the car?