Pro Hockey Store is evaluating two supplies of hockey skates: JA skates and Power skates. Pertinent information about each potential supplier follows: Relevant Item JA Skates Power Skates Purchase Price $50.00 $51.20 Ordering cost per order $8.00 $8.00 Carrying cost per year 20% of Purchase price 5% of Purchase price Inspection cost per unit $0.02 $0.00 Insurance, material handling, and so on per unit per year $3.00 $3.50 Annual Demand 12,000 12,000 Average quantity of inventory held during the year 120 units 120 units Required Return on investment 10% 10% Stockout cost per unit $34 $22 Stockout units per year 350 65 Customer Returns 300 25 Customer-return costs per unit $45 $45 a. Calculate the EOQ for both suppliers b. Calculate the relevant costs of purchasing (1) JA Skates and (2) Power Skates. From where should Pro Hockey buy skates ?
Pro Hockey Store is evaluating two supplies of hockey skates: JA skates and Power skates. Pertinent information about each potential supplier follows: Relevant Item JA Skates Power Skates Purchase Price $50.00 $51.20 Ordering cost per order $8.00 $8.00 Carrying cost per year 20% of Purchase price 5% of Purchase price Inspection cost per unit $0.02 $0.00 Insurance, material handling, and so on per unit per year $3.00 $3.50 Annual Demand 12,000 12,000 Average quantity of inventory held during the year 120 units 120 units Required Return on investment 10% 10% Stockout cost per unit $34 $22 Stockout units per year 350 65 Customer Returns 300 25 Customer-return costs per unit $45 $45 a. Calculate the EOQ for both suppliers b. Calculate the relevant costs of purchasing (1) JA Skates and (2) Power Skates. From where should Pro Hockey buy skates ?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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Pro Hockey Store is evaluating two supplies of hockey skates: JA skates and Power skates. Pertinent information about each potential supplier follows:
Relevant Item JA Skates Power Skates
Purchase Price $50.00 $51.20
Ordering cost per order $8.00 $8.00
Carrying cost per year 20% of Purchase price 5% of Purchase price
Inspection cost per unit $0.02 $0.00
Insurance, material handling, and so on per unit per year $3.00 $3.50
Annual Demand 12,000 12,000
Average quantity of inventory held during the year 120 units 120 units
Required Return on investment 10% 10%
Stockout cost per unit $34 $22
Stockout units per year 350 65
Customer Returns 300 25
Customer-return costs per unit $45 $45
a. Calculate the EOQ for both suppliers
b. Calculate the relevant costs of purchasing (1) JA Skates and (2) Power Skates. From where should Pro Hockey buy skates ?
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