a. Q* = (2DS/H) Q*= (2 x 60 x 1,000) / (4.75 x 0.25 / 52 x 5) Q* = (120,000)/ (1
ID: 373296 • Letter: A
Question
a. Q* = (2DS/H)
Q*= (2 x 60 x 1,000) / (4.75 x 0.25 / 52 x 5)
Q* = (120,000)/ (1.1875/260)
Q* = (2666666.66) =5,163.97 kgs
Total purchase 5,163.97 kgs per order
b. Average Inventory Holding Fees= 0.5(4000) x [4.75 x (0.25/52 x 5)] = 9.14per day
Delivery Fees= 60/ (4000/1,000) =1.5 per day
c. Average Inventory Holding Fees= 0.5(8000) x [4.75 x (0.25/52 x 5)] =$18.27 per day
Delivery Fees= 60/ (8000/1,000) =7.5 per day
d.
Average Inventory Holding Fees= 0.5(15,000) x [4.75 (1-0.05) x (0.25/52 x 5)] =$32.54 per day
Delivery Fees= 60/ (15,000/1,000) =$4 per day
Explanation / Answer
Sarah's Organic Soap Company makes organic liquid soap. One of the raw materials for her soaps is organic palm oil. She needs 1,000 kgs of palm oil per day on average. The supplier charges a $60 delivery fee per order (which is independent of the order size) and $4.75 per kg. Sarah's annual holding cost is 25%. Assume she operates and sells 5 days per week, 52 weeks per year. If Sarah wants to minimize her annual ordering and inventory holding costs, how much palm oil should she purchase with each order (in kgs)? kgs If Sarah orders 4,000 kgs with each order, what would be the annual sum of b. ordering and holding costs? Round your answer to 3 decimal places.) holding costs per kg sold? Sarah's supplier is willing to sell her palm oil at a 5% discount if she what would be her annual sum of ordering and holding costs? c If Sarah orders 8,000 kgs with each order, what would be sum of ordering and per kg C. d. purchases 15,000 kgs at a time. If she were to purchase 15,000 kgs per order
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