Question 4 (1 point) What if scenario (using the data below)... The consulting a
ID: 366085 • Letter: Q
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Question 4 (1 point) What if scenario (using the data below)... The consulting agency could negotiate with the supplier that had the higher annual cost. At what target cost per uniform does the higher cost supplier need to get down to in order to become the least cost supplier? . Purchases 50 uniforms per week from a local laundry service at an average cost of $22 20 per uniform. The average lead-time is three days and delivers the uniforms in batches of 50. The standard deviation on the local laundry service lead-time has been one day three weeks with a standard deviation of one week. Also require a minimum batch size of 200 uniforms Ignore ordering costs and use holding costs at 20% of material cost Assume the consulting agency Another potential source that will charge $21.50 per uniform. They state they have an average lead-time of continuously reviews inventory and arms for a cycle service level of 95% Weekly demand for the uniforms has a mean of 40 with a standard deviation of 10 $21.77 $2085 O $22.08 o $1341 Save Next Pago Page 4 of4 Save All Responses Go to Submit Quiz ardians of the Galaxy Vol. 2 (2017) 720p BrRip x264 VPPv >Uploaded 08-12 17:11. Ste 1.13 Ge, ULed brvpPV evies) en 224 19Explanation / Answer
for supplier 1
P=22.20
Lead time=3/7 week
Standard deviation of lead time=1/7 week
Batch size=50
Weekly demand, d =50
Standard deviation of weekly demand =10
From the probability table of a standard normal distribution, using a service level of 0.95, we obtain a value of z = 1.64
z=number of standard deviations =1.64
The average inventory level is (q/2 +safety stock)
Order quantity for lead time = 50*3/7 =21.4, but the minimum order quantity should be 50.so, Q=50
The average inventory level is (q/2 +safety stock) = (50/2 +11.71)
Safety stock = z* sqrt [ (3/7 * 102 ) + ( 50 2 * ( 1/7)2 ) ] =15.89
Annual holding cost per unit = 20% of 22.20 =$4.44
Total Annual Cost = annual purchase cost+ annual holding cost + annual ordering cost
= annual demand * purchase price, p + average inventory level * annual holding cost per unit + 0
= (50*52 weeks)* 22.20 + (50/2 +15.89) *4.44 + 0
= $ 57901.55
for supplier 2
P= $ 21.50
Lead time=3 WEEKS
Standard deviation of lead time=1 week
Batch size=200
Weekly demand, d =50
Standard deviation of weekly demand =10
From the probability table of a standard normal distribution, using a service level of 0.95, we obtain a value of z = 1.64
z=number of standard deviations =1.64
The average inventory level is (q/2 +safety stock)
Order quantity for lead time = 50*3 =150, but the minimum order quantity should be 200.so, Q=200
The average inventory level is (q/2 +safety stock) = (200/2 +86.78)
Safety stock = 1.64 * sqrt [ (3* 102 ) + ( 50 2 * 12 ) ] =86.78
Annual holding cost per unit = 20% of 21.5 =$4.30
Total Annual Cost = annual purchase cost+ annual holding cost + annual ordering cost
= annual demand * purchase price, p + average inventory level * annual holding cost per unit + 0
= (50*52 weeks)* 21.50 + (200/2 + 86.78) *4.30 + 0
= $ 56703.15
The first supplier is the higher cost supplier.
let the target cost be P at which the total cost of first supplier is equal to second supplier
carrying cost = 0.20* P
50*52*P + (50/2 +15.89) * (0.2 P) = 56703.15
P= $ 21.74
THE CLOSEST ANSWER IS A. $ 21.77
NOTE: I have not chosen B as the closest answer. chsoing B will cause greater
decrease in profits for the supplier
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