Question 2 Consider the company in Question 1. Now the company is considering working with a local supplier. Since the local supplier is located close to the company, there is no restriction on the frequency of the orders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order there is a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate. a) Calculate the economic order quantity. b) order quantity you found in (a) Calculate the total annual cost the company will incur with this supplier if they use the (Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost) The company is also considering producing the product at home. The production rate is 12000 units per year. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holding cost is based on the annual interest rate and the production cost of the product. c) Calculate the economic production quantity. d) How many production runs will be made each year? e) What percentage of the time the production machine will be working? f) Calculate the total annual cost the company will incur if they produce the product at home. g) Which option is less costly for the company, working with the local supplier or producing at home?
Question 2 Consider the company in Question 1. Now the company is considering working with a local supplier. Since the local supplier is located close to the company, there is no restriction on the frequency of the orders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order there is a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate. a) Calculate the economic order quantity. b) order quantity you found in (a) Calculate the total annual cost the company will incur with this supplier if they use the (Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost) The company is also considering producing the product at home. The production rate is 12000 units per year. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holding cost is based on the annual interest rate and the production cost of the product. c) Calculate the economic production quantity. d) How many production runs will be made each year? e) What percentage of the time the production machine will be working? f) Calculate the total annual cost the company will incur if they produce the product at home. g) Which option is less costly for the company, working with the local supplier or producing at home?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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