Consider the case of Hoosier Nursery: Hoosier Nursery is a wholesaler of seeds and plant nursery...

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Consider the case of Hoosier Nursery: Hoosier Nursery is a wholesaler of seeds and plant nursery products. It customarily sells Bessie's Best Cow Manure, an excellent fertilizer for spring gardens, which is ordered from Bessie's Dairy, a local dairy farm. Bessie's Best is sold in 25- and 50-pound bags. The 25-pound bags are generally purchased by homeowners and others tending personal gardens, while the larger bags are usually purchased by landscaping firms and commercial growers. Hoosier is open all year long and sells the smaller bags of Bessie's Best for $4 each and the larger bags for $6 each. It currently is out of Bessie's Best and is preparing to order the first shipment of the season. A review of last year's sales records shows that Hoosier placed 20 orders and sold 64,000 25-pound bags and 6,250 50-pound bags. Hoosier paid $20 for each order placed. Because the manure is transported and stored in bags stacked on shrink-wrapped pallets, so the threat of theft, obsolescence, and decay is very low, the carrying cost of the fertilizer is $1.00 per bag. In addition to handling and storage costs, carrying costs also include property and liability insurance premiums, tax expenses, and the opportunity cost on the funds invested in the inventory. Yesterday's conversation with Henry Harris, confirmed the same terms would apply this year. Another dairy farm, Gage's Guernsey Farm, has approached Hoosier Nursery with a competing offer. Gage's offer specifies that not only will it beat Bessie's best price by $1 per bag, but it will also offer advice on how Hoosier can minimize the total inventory costs associated with their fertilizer purchases. In addition, the cost of placing an order will decrease to $10 per order. A chemical analysis of samples of Bessie's Best and Gage's Greatest has indicated that the quality of two fertilizers is identical. You have been asked by the owner of Hoosier's Hoosier to apply the economic ordering quantity (EOQ) model to Hoosier's data and compare the two offers. Complete the following table for Hoosier's inventory of 50-pound bags. Make sure to round your answers up or down to the next whole bag, order, or dollar, as appropriate, and assume that sales are uniformly distributed throughout the year. Bessie's Best (Based on current practices) 1,000 bags 6 $400 Analysis Order size (bags per order) Number of orders per year Total ordering costs Average inventory (bags) Total carrying costs Total inventory costs Gage's Greatest (Based on EOQ) 11 Consider the case of Hoosier Nursery: Hoosier Nursery is a wholesaler of seeds and plant nursery products. It customarily sells Bessie's Best Cow Manure, an excellent fertilizer for spring gardens, which is ordered from Bessie's Dairy, a local dairy farm. Bessie's Best is sold in 25- and 50-pound bags. The 25-pound bags are generally purchased by homeowners and others tending personal gardens, while the larger bags are usually purchased by landscaping firms and commercial growers. Hoosier is open all year long and sells the smaller bags of Bessie's Best for $4 each and the larger bags for $6 each. It currently is out of Bessie's Best and is preparing to order the first shipment of the season. A review of last year's sales records shows that Hoosier placed 20 orders and sold 64,000 25-pound bags and 6,250 50-pound bags. Hoosier paid $20 for each order placed. Because the manure is transported and stored in bags stacked on shrink-wrapped pallets, so the threat of theft, obsolescence, and decay is very low, the carrying cost of the fertilizer is $1.00 per bag. In addition to handling and storage costs, carrying costs also include property and liability insurance premiums, tax expenses, and the opportunity cost on the funds invested in the inventory. Yesterday's conversation with Henry Harris, confirmed the same terms would apply this year. Another dairy farm, Gage's Guernsey Farm, has approached Hoosier Nursery with a competing offer. Gage's offer specifies that not only will it beat Bessie's best price by $1 per bag, but it will also offer advice on how Hoosier can minimize the total inventory costs associated with their fertilizer purchases. In addition, the cost of placing an order will decrease to $10 per order. A chemical analysis of samples of Bessie's Best and Gage's Greatest has indicated that the quality of two fertilizers is identical. You have been asked by the owner of Hoosier's Hoosier to apply the economic ordering quantity (EOQ) model to Hoosier's data and compare the two offers. Complete the following table for Hoosier's inventory of 50-pound bags. Make sure to round your answers up or down to the next whole bag, order, or dollar, as appropriate, and assume that sales are uniformly distributed throughout the year. Bessie's Best (Based on current practices) 1,000 bags 6 $400 Analysis Order size (bags per order) Number of orders per year Total ordering costs Average inventory (bags) Total carrying costs Total inventory costs Gage's Greatest (Based on EOQ) 11

Answer rating: 100% (QA)

Based on the Economic Order Quantity EOQ model and the provided information we need to make calculations for both Bessies Best based on current practices and Gages Greatest based on EOQ for a comparis... View the full answer