ONLINE Exercise #$1-$ KEY

FALL $2020$

Economic Order Quantity Exercise $(30$ Points$)$ SCM $300$

Buckshot Electronics is a chain of electronics superstores that is located throughout

California. They have $15$ locations concentrated primarily in heavily populated areas.

They sell thousands of products made by hundreds of different manufacturers.

Buckshot sells everything from phones, video cameras, and video game consoles to

large items like televisions.

Sony is one of their larger suppliers. They offer products in nearly every category

Buckshot offers to its customers. In fact, Sony sells multiple cell phone models through

Buckshot. One such model is the Q$9900.$

One of Buckshot's San Francisco stores is forecasted to sell about $7800$ units of the

Q$9900$ in the coming year. This forecasted demand is about average in terms of

Buckshot's $15$ other California locations. Presently they order $900$ units of the Q$9900$

every $6$ weeks.

Each store fills weekly orders through its Sony Distributor for items like TV$\text{'}$s$,$ cameras,

and of course, cell phones, in addition to many other items. Orders for cell phones must

be made in increments of $100$ units. The distributor takes only one order per week, but

Buckshot is not obligated to order every item every week. That order is then shipped $2$

days later to that individual Buckshot Electronics location by truck.

Buckshot's Central Procurement is looking to save money by investigating order sizes

and subsequent order frequency. You are being asked to create a recommendation for

order size and time between orders for the Q$9900$ based on the numbers for this San

Francisco location. Answer the questions that follow in order to create a detailed report

for your supervisor.

Below are some the key figures important in vour analysis:

Q$9900$ Wholesale Price

$$175\mathrm{.}00$

Q$9900$ Retail Price

$$299\mathrm{.}00$

Annual Per Unit Holding Costs are estimated at $35\%$ of the wholesale cost of the Q$9900.$

Costs associated with each order include:

Order Placement Fees $($Documentation$,$ Network Support$)$ $$250\mathrm{.}00$

Delivery $($Fuel$,$ Driver, Truck, etc.$)$ $ $$125\mathrm{.}00$

Packaging $$25\mathrm{.}00$

Receiving $($Inspection$,$ Documentation, etc.$)$ $$25\mathrm{.}00$

Labor $(5$ hours @ $$10\mathrm{.}00/$hr$)$ Stocking, Misc.

$$50\mathrm{.}00$

Based on the ordering scenario where orders are placed every $3$ weeks, over a $52-$week year, how much extra inventory will this store have accumulated? $($Take your answer to #$19,$ divide by $3,$ and then multiply by $52)$

Group of answer choices

$1314$

$438$

$1752$

$4333$

$867$

$3467$

$4767$

$2600$

$2052$

$3033$

$0$

$3900$