The campus store at a large Midwestern university sells writing tablets to students, faculty, and staff. They sell more tablets near exam time. During a typical 10-week quarter, the pattern of sales is 2,280, 1,120, 360, 3,340, 1,230, 860, 675, 1,350, 4,600, 1,210.The pads cost the store $1.20 each, and holding costs are based on a 30 percent annual interest rate. The cost of employee time, paperwork, and handling amounts to $30 per order.Assume 50 weeks per year.a. What is the optimal order policy during the 10-week quarter based on the Silver–Meal heuristic? Using this policy, what are the total holding and ordering costs incurred over the 10-week period?b. The bookstore manager has decided that it would be more economical if the demand were the same each week. In order to even out the demand he limits weekly sales (to the annoyance of his clientele). Hence, assume that the total demand for the 10-week quarter is still the same, but the sales are constant from week to week. Determine the optimal order policy in this case and compare the total holding and ordering cost over the 10 weeks to the answer you obtained in part (a). (You may assume continuous time for the purposes of your calculations, so that the optimal lot size is the EOQ.)c. Based on the results of parts (a) and (b), do you think that it is more economical in general to face a smooth or a spiky demand pattern?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The campus store at a large Midwestern university sells writing tablets to students, faculty, and staff. They sell more tablets near exam time. During a typical 10-week quarter, the pattern of sales is 2,280, 1,120, 360, 3,340, 1,230, 860, 675, 1,350, 4,600, 1,210.The pads cost the store $1.20 each, and holding costs are based on a 30 percent annual interest rate. The cost of employee time, paperwork, and handling amounts to $30 per order.
Assume 50 weeks per year.
a. What is the optimal order policy during the 10-week quarter based on the Silver–Meal heuristic? Using this policy, what are the total holding and ordering costs incurred over the 10-week period?
b. The bookstore manager has decided that it would be more economical if the demand were the same each week. In order to even out the demand he limits weekly sales (to the annoyance of his clientele). Hence, assume that the total demand for the 10-week quarter is still the same, but the sales are constant from week to week. Determine the optimal order policy in this case and compare the total holding and ordering cost over the 10 weeks to the answer you obtained in part (a). (You may assume continuous time for the purposes of your calculations, so that the optimal lot size is the EOQ.)
c. Based on the results of parts (a) and (b), do you think that it is more economical in general to face a smooth or a spiky demand pattern?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 12 images
