A Store Has Collected the Following Information on One of Its

question 75

Essay

A store has collected the following information on one of its products:
Demand = 5,000 units/year
Ordering costs = $12/order
Holding costs = $4/unit/year
Lead-time = 5 days weeks
Unit cost = $748/unit
Number of weeks per year = 50 weeks
a. The firm currently orders 500 units per order. What is the total cost of ordering and holding these goods under this system?
b. Determine their economic order quantity and cost of ordering and holding goods using the EOQ.
c. Form the ratio of the order quantities under the old policy and EOQ. Form the ratio of the EOQ to the old order quantity. Then form the ratio of their total system costs under the two ordering policies. Average these two ratios and compare this number with the ratio of the old total cost with the total cost under an EOQ policy.
d. How do they compare?

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Definitions:

Business Law

The branch of law that deals with the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales.

Enforceable Rules

Regulations or directives that can be legally imposed or executed by a governing authority.

Commercial Relationships

Commercial relationships involve interactions and exchanges between businesses or between businesses and consumers, focused on the buying, selling, or trading of goods or services.

National Conference

A large formal gathering that focuses on specific issues or topics, typically organized on a national level, involving participants from across the country.