The inventory manager has typically ordered a quantity of 800 each time an order is needed for one of their popular tires to take advantage of the discount provided by the supplier and save the company money. The following discount schedule has just been received reflecting recent changes in some of the discount percentages. The manager still maintains that an order quantity of 800 will save the company the most money because of the quantity discount.
800 or more
Last year, for an annual demand of 1600 tires and a lot size of 800 tires which resulted in an acquisition cost of $71.95, they had a total ordering cost of $120 and a total carrying cost of $17980. They forecast an annual demand of 1600 tires again for this year. Their unit carrying cost per dollar of inventory and their unit ordering cost per order for this year is assumed to be the same as last year.
Question 10. What is the optimal inventory policy that minimizes total cost for a periodic review system?
(A) A policy of ( 2 weeks , 62 ) for a total cost of $131017
(B) A policy of ( 6 months, 800 ) for a total cost of $133220
(C) A policy of ( 1 quarter , 400 ) for a total cost of $131250
(D) A policy of ( 2 quarters , 800 ) for a total cost of $18100
(E) none of the above
1. For each discount price (C), compute EOQ
2. If EOQ < Minimum for discount, adjust the quantityREAD MORE