Question: Verify your answer for the optimal order quantity obtained in part ( d ) by applying the EOQ formula by hand. ( f ) With

Verify your answer for the optimal order quantity obtained in part (d) by applying the EOQ formula by hand. (f) With the optimal order quantity obtained above, how Tim Madsen is the purchasing agent for Computer Center, a large discount computer store. He has recently added the hottest new computer, the Power model, to the stores stock of goods. Sales of this model now are running at about 13 per week. Tim purchases these computers directly from the manufacturer at a unit cost of $3,000, where each shipment takes half a week to arrive. Tim routinely uses the basic EOQ model to determine the stores inventory policy for each of its more important products. For this purpose, he estimates that the annual cost of holding items in inventory is 20 percent of their purchase cost. He also estimates that the administrative cost associated with placing each order is $75.
inventory level be when each order is placed? (g) How much does the optimal inventory policy reduce the total variable inventory cost per year (holding costs plus administrative costs for placing orders) for Power model computers from that for the policy described in part (a)? What is the percentage reduction

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!