Author Question: A local lamp store expects to sell 2000 lamps in the coming year. It costs the store 1.00 in ... (Read 461 times)

Marty · **on:** Jul 10, 2018

A local lamp store expects to sell 2000 lamps in the coming year. It costs the store 1.00 in carrying costs for each
lamp and 10.00 for each order placed.

a. What is the economic order quantity for the lamps?
b. How many orders will be placed each year?
c. If the store wants a one-week safety stock and it takes one week to receive an order after it has been placed,
what should the inventory level be when a new order is placed? Assume a 50-week year.

Question 2

A flower shop is trying to determine the optimal order quantity of the wicker baskets that it places many of its
arrangements in. The store thinks it will sell 2000 of these baskets over the next year. The baskets cost the shop
2.00 each.

The carrying cost of the baskets is 0.15 each per year. It costs the shop 8.00 to order.
a. What is the economic order quantity?
b. What is the total cost for ordering the baskets once a year? Four times a year?

dyrone · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

a. Q = 2SO
C =
210.(2000)
1 = 200
b. orders = S/Q = 2000/200 = 10 orders per year
c. 1-week supply = 2000/50 = 40 lamps
order level = safety stock + 1 - week order lag
= 40 + 40
= 80 lamps is the order point

Answer to Question 2

a. Q = 2SO
C =
2(2000)8
.15 = 462 units
b. total cost: (Q/2)C + (S/Q)O
ordering once: (2000/