Author Question: The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically ... (Read 127 times)

xclash · **on:** Dec 3, 2019

Question 1

The annual demand, ordering cost, and the inventory carrying cost rate for a certain item are D = 600 units, S = $20/order and I = 30% of item price. Price is established by the following quantity discount schedule. What should the order quantity be in order to minimize the total annual cost?

Quantity	1 to 49	50 to 249	250 and up
Price	$5.00 per unit	$4.50 per unit	$4.10 per unit

Question 2

The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair which costs $300. The annual holding cost rate is 40%, annual demand is 900, and the order cost is $20 per order. The lead time is 4 days. Because demand is variable (standard deviation of daily demand is 2.4 chairs), PCE has decided to establish a customer service level of 90%. The store is open 300 days per year.

a. What is the optimal order quantity?
b. What is the safety stock?
c. What is the reorder point?

sultana.d · **Reply #1 on:** Dec 3, 2019

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