Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sel

Question

Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD; DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order$114.50 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year$ 4.50 11) What is the economic order quantity? A) 64.08 packages B) 21.04 packages C) 37.50 packages D) 72.03 packages 12) What are the annual relevant ordering costs? A) $9,057 B) $7,157 C) $8,266 D) $7,121 13) What are the annual relevant carrying costs? A) $7,122 B) $8,265 C) $9,057 D) $7,157 14) What are the relevant total costs? A) $14,279 B) $18,114 C) $16,531 D) $14,278 15) How many deliveries will be made during each time period? A) 72.19 deliveries B) 60.11 deliveries C) 89.23 deliveries D) 52.18 deliveries 16) For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information: Annual demand in units 250 Days used per year 250 Lead time, in days 10 Ordering costs $100 Annual unit carrying costs $20 Required: Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs. EOQ: Average inventory: Orders per year: Average daily demand: Reorder point: Annual ordering costs: Annual carrying costs:

Explanation / Answer

11) Economic order quantity- C) 37.50 packages

12) Annual relevant ordering costs- B) $7,157

13) Annual relevant carrying costs- A) $7,122

14) The relevant total costs-B) $18,114

15) Deliveries will be made during each time period-C) 89.23 deliveries

16)

EOQ                                       = The square root of [(2 x 250 x $100) / $20] = 50

Average inventory                     = 50/2 = 25

Orders per year                        = 250/50 = 5

Average daily demand               = 250/250 = 1 unit

Reorder point                          = 10/1 = 10 units

Annual ordering costs              = 5 x $100 = $500

Annual carrying costs              = 25 x $20 = $500

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.