Question 3: (20 marks)

Suppose you are employed as a management trainee (MT) because of your good intern performance, particularly your MRP of the new product T (in Question 2). You are assigned to manage the purchase of special part of microchip MC, used extensively in its new product lines.

1. The estimated annual demand for MC is 200,000 units with unit price of $100. The holding cost of each unit per year is estimated to be 2% of the unit price, and the ordering cost is $3000 per order. The company has an American supplier of MC which offers 1% discount on unit price if order quantity is more 30,000 units with a lead time of 30 days to fill an order. Both the company and the supplier operate 300 days per year.

You have to determine the following:

1. the EOQ for unit price of $100, (2 marks)

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2. the total cost for unit price of $100, (3 marks)

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3. the best order quantity, (2 marks)

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4. the minimum total cost for the best order quantity, (3 marks)

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5. the number of orders placed per year for the best order quantity. (2 marks)

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1. the reorder point (ROP) for the best order quantity. (2 marks)

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