Floral Beauty, Inc., is a large floral arrangements store located in Asheville M

Question

Floral Beauty, Inc., is a large floral arrangements store located in Asheville Mall. Bridal Lilies, which are a specially created bunch of lilies for bridal bouquets, cost Floral Beauty $17 each. There is an annual demand for 24,000 Bridal Lilies. The manager of Floral Beauty has determined that the ordering cost is $120 per order, and the carrying cost, as a percentage of the unit cost, is 16%. Floral Beauty is now considering a new supplier of Bridal Lilies. Each lily would cost only $16.50, but to get this discount, Floral Beauty would have to buy shipments of 3,000 Bridal Lilies at a time. Should Floral Beauty use the new supplier and take this discount for quantity buying? e) What is the annual holding cost for the new supplier (when purchasing 3,000 each order)? f) What is the total annual inventory cost (including purchase cost) for the new supplier (when purchasing 3,000 each order)? g) What should Floral Beauty do? Be sure to always round inventory quantities (Q, R, SS, I_max) values up to the next integer for the final answers. All other values should be calculated based on the standard formulas without rounding them to integers and should be entered with one decimal place (e.g. average inventory, average number of orders, etc.).

Explanation / Answer

1)the annual hold cost for new supplier
= (24,000/3000) *120
= $960
2) the total inventory cost of new supplier
= (24,000*16.5) +960+ (3000/2) *2.72
=$401,040
3)Floral beauty should shift to the new supplier of bridal lilies

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