value: 10.00 points Problem 13-5 Garden Variety Flower Shop uses 750 clay pots a
ID: 326551 • Letter: V
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value: 10.00 points Problem 13-5 Garden Variety Flower Shop uses 750 clay pots a month. The pots are purchased at $2.00 each. Annual carrying costs per pot are estimated to be 30 percent of cost, and ordering costs are $20 per order. The manager has been using an order size of 1,500 flower pots. a. What additional annual cost is the shop incurring by staying with this order size? (Round your optimal order quantity to the nearest whole number. Round all other intermediate calculations and your final answer to 2 decimal places. Omit the "$" sign in your response.) Additional annual cost b. Other than cost savings, what benefit would using the optimal order quantity yield (relative to the order size of 1,500)? (Use the rounded order quantity from Part a. Round your final answer to the nearest whole percent. Omit the "%" sign in your response.) About % of the storage space would be needed References eBook &Resources;Explanation / Answer
D = 750 per month = 9000 per year
H = 30% of 2 = 0.6
S = 20
Q = 1500
EOQ = sqrt(2*D*S/H) = sqrt(2*9000*20/0.6) = 774.59 ~ 775
Total Cost with Order Quantity as 1500 = Q*H/2 + D*S/Q = 1500*0.6/2 + 9000*20/1500 = 570
Total Cost with Order Quantity as EOQ (775) = Q0*H/2 + D*S/Q0 = 775*0.6/2 + 9000*20/775= 464.75 ~ 465
A) Additional Annual Cost = 570 - 465 = 105
B) Cost Benefit by EOQ = 105/570 = 18.42%
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