Question: Mr . Jack recently completed a course in logistics management and now realizes that there are significant costs associated with ordering and maintaining inventory at

Mr. Jack recently completed a course in logistics management and now realizes that there are significant costs associated with ordering and maintaining inventory at his distribution center. Mr. Jack has learned that the EOQ is the replenishment logic that minimizes these costs. In an effort to find the EOQ for measuring cups, Mr. Jack has gathered relevant data. Mr. Jack expects to sell 50,000 measuring cups this year. ABC Company acquires the measuring cups for 75 cents each from XYZ Industries. XYZ charges $8 for processing each order. In addition, Mr. Jack estimates his companys inventory carrying cost to be 12 percent annually.
a. Find Mr. Jack EOQ for measuring cups. Assume that Mr. Jack accepts ownership of products upon arrival at his DC.
b. Now assume Mr. Jack must arrange for inbound transportation of the measuring cups since ABC Company accepts ownership of products at the suppliers shipping point. Quantities of fewer than 4,000 measuring cups cost 5 cents per unit to ship. Quantities of 4,000 and above cost 4 cents per unit to ship. Determine the difference in total costs associated with an EOQ of 4,000 units and the EOQ level found in part (a) when transportation costs must be considered.
c. Given the information above and the low cost EOQ alternative determined in part (b), use period-order-quantity logic to determine the number of orders ABC Company would place each year for measuring cups and the time interval between orders.

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