M capter 13 Homework 1 tpx Problem 13-14 A jewelry firm buys semiprecious stones
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Question
M capter 13 Homework 1 tpx Problem 13-14 A jewelry firm buys semiprecious stones to make bracelets and rings. The supplier quotes a price of $83 per stone for quantities of 600 slones or more, $9 8 per stone lor orders of 400 to 599 stones, and $10 per stone for lesser quantities. The jewelry firm operates 126 days per year. Usage rate is 25 stones per day and ordering costs are $48. a. If carrying costs are $2 per year for each stone, find the order quantity that will minimize total annual cost. (Round your intermediate calculations to the nearest whole number.) quantity b. If annual carrying costs are 21 percent of unit cost, what is the optimal order size? (Round your intermediate calculations to the nearest whole number.) Optrnal order sze Oplimal order szoslones stones c. If lead time is 4 working days, at what point should the company reorder? (Round your intermediate calculations to the nearest whole number.) Reorder quantity stones Tm Cortana. Ask me anything. ODExplanation / Answer
a. Order quantity = 662 stones
Explanation: EOQ = Square root (2*Annual Demand*ordering cost / carrying cost per unit per annum)
= Square root (2*(25*365)*48/2) = 661.81 or 662 stones
b. Optimal order size = 709 units
Explanation: This will have a minimum cost
c.Reorder Quantity = 100 stones
In case, the lead time is 4 working days. (Lead time * Avergae demand during lead time)
Price Level: 1 2 3 Minimum quantity for price Qmin = 600 400 399 Price P = 8.30 9.80 10.00 Optimal Q (for each price) Qopt = 709 709 709 Number of orders per year D/Qopt = 12.87024 12.87024 12.87024 Average Inventory Qopt/2 = 354.5 354.5 354.5 Annual carrying cost (Qopt/2) * H = 617.8935 617.8935 617.8935 Annual ordering cost (D/Qopt) * S = 617.77151 617.77151 617.77151 Annual purchase cost P * D = 75737.5 89425 91250 Total Annual Cost TC = 76973.165 90660.665 92485.665Related Questions
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