Problem 2: You have taken over as inventory manager at Dino’s Florists. You would like to use EOQ to compute the best quantity of orchids to order. The previous manager at Dino’s ordered orchids once a month in quantities of 1,000 to simply match the monthly demand. Orchids are expensive to order with an ordering cost of $300 per order. Holding cost is estimated at 15% of product cost annually, with a product cost of $60 per unit. a. What is economic order quantity decision for Dino’s Florists? b. What is the number of orders per year? c. What is the annual holding cost?

Problem 2: You have taken over as inventory manager at Dino’s Florists. You would like to use EOQ to compute the best quantity of orchids to order. The previous manager at Dino’s ordered orchids once a month in quantities of 1,000 to simply match the monthly demand. Orchids are expensive to order with an ordering cost of $300 per order. Holding cost is estimated at 15% of product cost annually, with a product cost of $60 per unit. a. What is economic order quantity decision for Dino’s Florists? b. What is the number of orders per year? c. What is the annual holding cost?

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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Problem 2: You have taken over as inventory manager at Dino’s Florists. You would like to use EOQ to compute the best quantity of orchids to order. The previous manager at Dino’s ordered orchids once a month in quantities of 1,000 to simply match the monthly demand. Orchids are expensive to order with an ordering cost of $300 per order. Holding cost is estimated at 15% of product cost annually, with a product cost of $60 per unit. d. What is the reorder point (ROP)?e. Above (d) assumes no safety stock. Given that the standard deviation of demand during lead time is 8 orchids, compute the amount of safety stock and the new ROP, assuming that you desire no more than 5% stockout level.
Barbara Flynn is in charge of maintaining hospital supplies at General Hospital. During the past year, themean lead time demand for bandage BX-5 was 60 (and wasnormally distributed). Furthermore, the standard deviationfor BX-5 was 7. Ms. Flynn would like to maintain a 90%service level. a) What safety stock level do you recommend for BX-5?b) What is the appropriate reorder point?
Allen Enterprises uses a continuous-review inventory control system for one of its most popular computer games. The firm operates 50 weeks in a year with an average lead time of 9 weeks. The annual demand is 12,000 games, with a standard deviation of 245 games. Ordering Costs are $30, with Holding costs per game of $38 per year. What is the economic order quantity for this item? If Allen Enterprises wants to provide a 95-percent cycle-service level, what should be the reorder point?
Scary Clowns, Inc., supplies special makeup cases to a major circus. The circus orders its EOQ of 800 cases every 3 months from Scary Clowns. Scary Clowns incurs setup costs of $5,000 every time it produces these cases, and its annual holding cost per case is $14. Question content area bottom Part 1 a. Which inventory model fits the best to this problem? A. All-units quantity discounts model B. Incremental quantity discounts model C. One-time sale model D. EOQ model E. POQ model F. Lumpy demand model b. Scary Clowns should produce enter your response here units in each batch (round your response to the nearest integer). c. The total annual setup and holding cost for Scary Clowns using this policy is $enter your response here (round your response to the nearest
Sarah’s Organic Soap Company makes organic liquid soaps. She purchases organic Palm oil to make her soaps. She needs 1,000 kgs of Palm oil per day on average. The supplier charges a $60 delivery fee per order (which is independent of the order size). Sarah’s annual holding cost is $1.825 per kg of palm oil. Assume there are 365 days a year. a. What is the daily cost of ordering and holding when EOQ is ordered? b. Again, assume that Sarah needs 1,000 kgs of Palm oil per day. Sarah’s supplier is willing to sell Palm oil to her at a 10% discount on its selling price if she purchases 10,000 kgs at a time. If Sarah takes the offer and orders 10,000 kg at a time, how much will be the resulting daily cost of ordering and holding? (Assume that the fixed cost of ordering is $60 per order and the per unit inventory holding cost is 0.005 per day per kg of Palm oil.) c. Again, assume that Sarah needs 1,000 kgs of Palm oil per day. Sarah’s supplier is willing to sell Palm oil to her at a 10%…
Dave's Sporting Goods sells Mountain Mouse freeze-dried meals. Dave's uses a continuous review system to manage meal inventories. Suppose Mountain Mouse offers the following volume discounts to its customers: 1−950 meals: $6.50 per meal 951 or more meals: $4.50 per meal. Annual demand is 2,900 meals, and the cost to place an order is $23. Suppose the holding cost is $1.50 per meal per year. How many meals should Dave's order at a time? Part 2 Dave's Sporting Goods should order ______ meals at a time to take advantage of the lower cost per unit. (Enter your response rounded to the nearest whole number.)
A gift shop sells Little Lentils dolls at a steady pace of 10 per day, 310 days per year. The cost of the dolls is $5, and the gift shop uses an annual interest rate of 20 percent to compute holding cost. Question 1: If the shop wants to place an average of 20 replenishments orders per year, what order quantity should it use? Question 2: If the shop calculates EOQ for ordering dolls and gets 100, what is the implied fixed order cost (K) Question 3: If the shop estimates that the cost of placing an order is $10, what is the optimal order quantity (EOQ)?
Mattress Firm sells water beds and assorted supplies. Their best-selling bed has an annual demand of 395 units. Ordering cost is $43; holding cost is $5 per unit per year. a) To minimize the total cost, how many units should be ordered each time an order is placed? EOQ = units (round your response to the nearest whole number). b) If the holding cost per unit was $6.00 instead of $5, what would the optimal order quantity be? New EOQ = units (round your response to the nearest whole number).
Inventory Management Basic EOQ Webber Tools sells power washers and is open for business 320 days a year. It costs the store $3750 each time it places an order with the manufacturer for the washers. The annual cost of carrying a washer in inventory is $400. The manager uses the Basic EOQ Model and forecasts an annual demand for the washers of 1200 units. What is the economic order quantity? What is the total minimum annual inventory cost? What is the average inventory level? How many orders per year will be required? How long is the order cycle time? Now assume the manager does not use the EOQ model. Instead, the manager has been ordering 125 washers at a time. How much money will be saved in annual inventory costs if the company switches to the EOQ (assume no stockouts)?
Demand for a popular athletic shoe is nearly constant at 1600 pairs per week for a regional division of a national retailer. The cost per pair is $64. It costs $75 to place an order, and annual holding costs are charged at 25% of the cost per unit. The lead time is 3 weeks. One year has 52 weeks.a. What is the Economic Order Quantity?b. What is the reorder point?c. What is the cycle time?d. What is the total annual cost?
Bart’s Barometer Business (BBB) is a retail outlet that deals exclusively with weather equipment. Currently BBB is trying to decide on an inventory and reorder policy for home barometers. These cost BBB $60 each and demand is about 1200 per year distributed fairly evenly throughout the year. Reordering costs are $50 per order and holding costs are figured at 20% of the cost of the item. BBB is open 300 days a year (6 days a week and closed two weeks in August). Lead time is 60 working days. a.Develop a total cost model for this system. b. What is the optimal reorder quantity? c. What is the cycle time?
Bart’s Barometer Business (BBB) is a retail outlet that deals exclusively with weather equipment. Currently BBB is trying to decide on an inventory and reorder policy for home barometers. These cost BBB $60 each and demand is about 1200 per year distributed fairly evenly throughout the year. Reordering costs are $50 per order and holding costs are figured at 20% of the cost of the item. BBB is open 300 days a year (6 days a week and closed two weeks in August). Lead time is 60 working days. Develop a total cost model for this system. What is the economic order quantity? What is the cycle time? What is the reorder policy for BBB? What total annual cost does the model give?