Question: My Kitchen Delights MKD a regional producer of gourmet jams

My Kitchen Delights (MKD), a regional producer of gourmet jams and jellies, uses approximately 24,000 glass jars each month during its production. Because of space limitations, MKD orders 5000 jars at a time. Monthly holding cost is $0.08 per jar, and the ordering cost is $60 per order. The company operates 20 days per month.
(a) What penalty cost is the company incurring by its present replenishment policy?
(b) MKD would prefer to order eight times each month but needs to justify any change in order size. How much would ordering cost need to be reduced to justify a lot size of 3000 jars?
(c) If MKD can reduce its ordering cost to $30, what is the optimal replenishment order quantity?

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  • CreatedJuly 11, 2014
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