A food store considers importing a special kind of smoked sausages for sale. The store estimates...

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A food store considers importing a special kind of smoked sausages for sale. The store estimates that the demand is stable at 2100 per year. The cost of placing an order and get it delivered is 2000 kr., and the cost of the sausages is 18.50 kr. each. The store uses an annual internal interest rate of 22% for the cost of capital. In addition, they operate with a storage cost of 3% of the value of the item, and a cost of 2% for taxes and insurance. a) What is the optimal order size of the sausages and how often should they be ordered? b) What is the ordering cost and the holding cost with this strategy? c) How many sausages should be on stock when a new order is placed if the lead-time is 3 weeks? d) The market price for a sausage is estimated to 30 kr. What annual profit can the store expect on this product? e) The manager of the store realizes that the sausages will have a shelf life of 6 weeks after they are delivered at the store. How will this affect the ordering strategy? What will the holding costs, the ordering costs and the profit be with this new assumption? A food store considers importing a special kind of smoked sausages for sale. The store estimates that the demand is stable at 2100 per year. The cost of placing an order and get it delivered is 2000 kr., and the cost of the sausages is 18.50 kr. each. The store uses an annual internal interest rate of 22% for the cost of capital. In addition, they operate with a storage cost of 3% of the value of the item, and a cost of 2% for taxes and insurance. a) What is the optimal order size of the sausages and how often should they be ordered? b) What is the ordering cost and the holding cost with this strategy? c) How many sausages should be on stock when a new order is placed if the lead-time is 3 weeks? d) The market price for a sausage is estimated to 30 kr. What annual profit can the store expect on this product? e) The manager of the store realizes that the sausages will have a shelf life of 6 weeks after they are delivered at the store. How will this affect the ordering strategy? What will the holding costs, the ordering costs and the profit be with this new assumption?

Answer rating: 100% (QA)

a To determine the optimal order size of the sausages and how often they should be ordered we can use the economic order quantity EOQ formula The EOQ ... View the full answer