SOLVED

59) The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. (a) What is the optimal order quantity, given the following price breaks for purchasing the item? (b) What price should the firm pay per unit? (c) What is the total annual cost at the optimal behavior? Quantity Price 1-9 $2.95 per unit 10 – 999 $2.50 per unit 1,000 – 4,999 $2.30 per unit 5,000 or more $1.85 per unit 60) A local artisan uses supplies purchased from an overseas supplier. The owner believes the assumptions of the EOQ model are met reasonably well. Minimization of inventory costs is her objective. Relevant data, from the files of the craft firm, are annual demand (D) =150 units, ordering cost (S) = $42 per order, and holding cost (H) = $4 per unit per year a. How many should she order at one time? b. How many times per year will she replenish her inventory of this material? c. What will be the total annual inventory (holding and setup) costs associated with this material (rounded to the nearest dollar)? d. If she discovered that the carrying cost had been overstated, and was in reality only $1 per unit per year, what is the corrected value of EOQ? 61) Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per pound per week because space is very scarce. It costs the firm $8 to prepare an order. Assume the basic EOQ model with no shortages applies. Assume 52 weeks per year, closed on Mondays. a. How many pounds should Groundz order at a time? b. What is total annual cost (excluding item cost) of managing this item on a cost-minimizing basis? c. In pursuing lowest annual total cost, how many orders should Groundz place annually? d. How many days will there be between orders (assume 312 operating days) if Groundz practices EOQ behavior?