Answer to question a : Annual demand of B.Zoom = D = 400 Kgs/ week x 52 weeks =
ID: 372795 • Letter: A
Question
Answer to question a :
Annual demand of B.Zoom = D = 400 Kgs/ week x 52 weeks = 20,800
Annual unit holding cost = Ch = 30 % of $1.3 = $0.39
Ordering cost = $50/order
Optimal quantity to be ordered ( EOQ) to minimize sum of annual ordering cost and holdng cost =
EOQ = Square root ( 2 x Co x D/Ch)
= Square root ( 2 x 50 X 20800/0.39)
= 2309.40 ( 2309 rounding to nearest whole number )
BZOOM SHOULD ORDER 2309 KGS
Answer to question b:
Order quantity = 4000 kg
Annual ordering cost
= Ordering cost / order x Number of orders
= Co x Annual demand/ order quantity
= 50 x 20800 /4000
= $260
Annual holding cost
= Annual unit holding cost x Average inventory
= Ch x Order quantity / 2
= 0.39 x 4000/2
= $780
Therefore, total ordering plus annual holding cost
= $260 + $780
= $1040
SUM OF ANNUAL ORDERING AND HOLDING COST = $1040
Answer to question c :
Order quantity = 2000 kg
Annual ordering cost
= Ordering cost / order x Number of orders
= Co x Annual demand/ order quantity
= 50 x 20800 /2000
= $520
Annual holding cost
= Annual unit holding cost x Average inventory
= Ch x Order quantity / 2
= 0.39 x 2000/2
= $ 390
Therefore, total ordering plus annual holding cost
= $520 + $390
= $910
SUM OF ANNUAL ORDERING AND HOLDING COST = $910
Answer to question d:
Ordering quantity = EOQ = 2309
Annual ordering cost
= Ordering cost / order x Number of orders
= Co x Annual demand/ order quantity
= 50 x 20800 /2309
= $450.41
Annual holding cost
= Annual unit holding cost x Average inventory
= Ch x Order quantity / 2
= 0.39 x 2309/2
= $ 450.25
Therefore, total ordering plus annual holding cost
= $450.41 + $450.25
= $900.66
Annual purchase cost = $1.3 / kg x 400/ week x 52 weeks = $27040
Annual EOQ cost as percentage of annual purchase cost
= 900.66 /27040 x 100
= 3.33%
Total cost = Purchasing cost + ordering cost + Holding cost = 27040 + 900.66 = $27940.66
ANNUAL COST OF EOQ AS PERCENATGE OF ANNUAL PURCHASE COST = 3.33%
Answer to question E :
Ordering quantity = 10000
Annual ordering cost
= Ordering cost / order x Number of orders
= Co x Annual demand/ order quantity
= 50 x 20800 /10000
= $104
Annual holding cost
= Annual unit holding cost x Average inventory
= Ch x Order quantity / 2
= 0.39 x 10000/2
= $ 1950
Therefore, total ordering plus annual holding cost
= $104 + $1950
= $2054
Annual purchase cost = 97.5% of $1.3 / kg x 400/ week x 52 weeks = $ 26364
Total cost = Purchasing cost + ordering cost + Holding cost = 26364 + 1950 + 2054 = $30368
Thus , Bzoom’s total cost will increase vis a vis total cost for EOQ by
= $30368 - $27940.66
= $2427.34
ANSWER : IT WOULD INCREASE BY MORE THAN $1000
BZOOM SHOULD ORDER 2309 KGS
Explanation / Answer
BZoom sells toy bricks that can be used to construct a wide range of machines, animals, buildings, etc. They purchase a red dye powder to include in the resin they use to make the bricks. The power is purchased from a supplier for $1.3 per kg. At one production facility, BZoom requires 400 kgs of this red dye power each week. BZoom's annual holding costs are 30% and the fixed cost associated with each order to the supplier is S50 a How many kgs should BZoom order from its supplier with each order to minimize kgs the sum of ordering and holding costs? If BZoom orders 4,000 kgs at a time, what would be the sum of annual ordering and holding costs? Round your answer to 3 decimal places.) If BZoom orders 2,000 kgs at a time, what would be the sum of ordering and holding costs per kg of dye? C. per kg Round your answer to 2 decimal places.) If BZoom orders the quantity from part (a) that minimizes the sum of the ordering d. and holding costs. What is the annual cost of the EOQ expressed as a percentage percent of the annual purchase cost? BZoom's purchasing manager negotiated with their supplier to get a 2.5% discount on orders of 10,000 kgs or greater. What would be the change in BZoom's annual total cost (purchasing ordering and holding) if they took advantage of this deal instead of ordering smaller quantities at the full price? O It would decrease by more than $1,000 O It would decrease by less than $1,000 O It would increase by less than $1,000 O It would increase by more than $1,000
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