Suppose That You Are the Manager of a Production Department

question 108

Essay

Suppose that you are the manager of a production department that uses 400 boxes of rivets per year.The supplier quotes you a price of $8.50 per box for an order size of 199 boxes or less, a price of $8.00 per box for orders of 200 to 999 boxes, and a price of $7.50 per box for an order of 1,000 or more boxes.You assign a holding cost of 20 percent of the price to this inventory.What order quantity would you use if the objective is to minimize total annual costs of holding, purchasing, and ordering? Assume ordering cost is $80/order.

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Definitions:

Scored Tablet

A tablet manufactured with a groove or line, allowing it to be easily split into halves or quarters for dosing flexibility.

Unscored Tablet

A solid dosage form of medication without any indents or marks, which could make it harder to split or break evenly.

24-Hour Clock System

A timekeeping system that runs from midnight (00:00) to 23:59, eliminating the need for AM and PM to denote morning or afternoon/evening times.