A manager just received a new price list from a supplier. It will now cost $ 1.00 a box for order quantities of 801 or more boxes, $ 1.10 a box for 200 to 800 boxes, and $ 1.20 a box for smaller quantities. Ordering cost is $ 80 per order and carrying costs are $ 10 per box a year. The firm uses 3,600 boxes a year. The manager has suggested a “round number” order size of 800 boxes. The manager's rationale is that with a U-shaped cost curve that is fairly flat at its minimum, the difference in total annual cost between 800 and 801 units would be small anyway. How would you reply to the manager's suggestion? What order size would you recommend?
Answer to relevant QuestionsA newspaper publisher uses roughly 800 feet of baling wire each day to secure bundles of newspapers while they are being distributed to carriers. The paper is published Monday through Saturday. Lead time is six workdays. ...A company uses 85 circuit boards a day in a manufacturing process. The person who orders the boards follows this rule: Order when the amount on hand drops to 625 boards. Orders are delivered approximately six days after ...Caring Hospital’s dispensary reorders doses of a drug when the supply on hand falls to 18 units. Lead time for resupply is three days. Given the typical usage over the last 10 days, what service level is achieved with the ...Demand for devil's food whipped- cream layer cake at a local pastry shop can be approximated using a Poisson distribution with a mean of six per day. The manager estimates it costs $ 9 to pre-pare each cake. Fresh cakes sell ...1. Would using an order interval other than every six weeks reduce costs? If so, what order interval would be best, and what order size would that involve? 2. Would you recommend changing to the optimal order interval? ...
Post your question