Question 1 options: IM.82 A distributor of industrial equipment purchases specia
ID: 421766 • Letter: Q
Question
Question 1 options:
IM.82 A distributor of industrial equipment purchases specialized compressors for use in air conditioners. The regular price is $50.00, however, the manufacturer of this compressor offers quantity discounts per the following discount schedule:
The appliance distributor pays $34 each time it places an order with the manufacturer. Holding costs are negligible (none) but they do earn 9% annual interest on all cash balances (meaning there will be a financial opportunity cost when they put cash into inventory). Annual demand is expected to be 6,000 units.
When there is no quantity discount (Option Plan A, the first row of the schedule listed above), what is the adjusted order quantity? (Display your answer to the nearest whole number.)
Based on your answer to the previous question, and based on the annual demand as stated above, what will be the annual ordering costs? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (two questions back), what will be the average number of units held in inventory? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (three questions back), and assuming a materials cost for the given discount, what will be the annual holding cost? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (four questions back), and assuming a materials cost for the given discount, what will be the total annual inventory cost? (Display your answer to the nearest whole number.)
When there is a 0.75% discount (Option Plan B, the second row of the schedule listed above), what is the adjusted order quantity? (Display your answer to the nearest whole number.)
Based on your answer to the previous question, and based on the annual demand as stated above, what will be the annual ordering costs? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (two questions back), what will be the average number of units held in inventory? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (three questions back), and assuming a materials cost for the given discount, what will be the annual holding cost? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (four questions back), and assuming a materials cost for the given discount, what will be the total annual inventory cost? (Display your answer to the nearest whole number.)
When there is a 2.00% discount (Option Plan C, the third row of the schedule listed above), what is the adjusted order quantity? (Display your answer to the nearest whole number.)
Based on your answer to the previous question, and based on the annual demand as stated above, what will be the annual ordering costs? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (two questions back), what will be the average number of units held in inventory? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (three questions back), and assuming a materials cost for the given discount, what will be the annual holding cost? (Display your answer to the nearest whole number.)
Using the adjusted order quantity as determined above (four questions back), and assuming a materials cost for the given discount, what will be the total annual inventory cost? (Display your answer to the nearest whole number.)
Which option plan should you choose? (In the answer field below, write the number the corresponds to your answer. Do not put a period after the number.)
A
B
C
Please show all work
Explanation / Answer
PLEASE FIND BELOW ANSWERS TO FIRST 5 QUESTIONS :
As per option plan A , regular price is $50 per unit
Following are the details provided :
Annual demand = D = 6000 units
Ordering cost = Co = $34
Annual unit inventory cost = Ch = 9% of $50 = $4.5
Therefore , adjusted order quantity ( EOQ )
= Square root ( 2 x Co x D / Ch )
= Square root ( 2 x 34 x 6000 /4.5)
= 301.10 ( 301 rounded to nearest whole number )
Annual ordering cost
= Ordering cost x Number of orders
= Co x Annual demand / order quantity
= Co x D / EOQ
= $34 X 6000/301
= $677.74 ( $678 rounded to nearest whole number )
Average number of units held in inventory = EOQ/ 2 = 301/2 = 150.50 ( 151 rounded to nearest whole number )
Annual holding cost
= Annual unit inventory cost x Average inventory
= $4.5 x 150.50
= $677.25 ( $677 rounded to nearest whole number )
Total annual inventory cost
= Annual ordering cost + annual holding cost
= $677.74 + $677.25
= $1354.99 ( $1355 rounded to nearest whole number )
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