One of the top-selling products at a souvenir shop at the Victoria Peak Hong Kong is autographed picture of Andy Lau who is Hong Kong famous movie star. Sales are 18 pictures per week, and the purchase price from the supplier is $60 per picture. The total cost of placing an order from supplier is $45. Annual holding costs are $15 per picture. Assume that there are 50 weeks in a year.

(a) Calculate the size orders should the souvenir shop place by using EOQ approach.

(b) Find out the annual inventory cost (i.e. holding plus ordering).

(c) Analyse how many orders will be placed per year.

(d) Decide how often orders will be placed.

(e) A company currently has 200 units of a product on hand that it orders every two weeks when the salesperson visits the premises. Demand for the product averages 20 units per day with a standard deviation of 5 units. Lead time for the product to arrive is seven days. Management has a goal of a 95 percent probability of not stocking out for this product. The salesperson is due to come in late this afternoon when 180 units are left in stock (assuming that 20 are sold today). Determine how many units should be ordered.

Answer rating: 100% (QA)

Quiz a Supplier order cost 45 Annual holding cost 15 per picture EOQ 2DSH 2185015 16... View the full answer