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3 DOLLARS OF ADDITIONAL SALES NEEDED TO EQUAL $1 SAVED THROUGH THE SUPPLY CHAIN PRECENT OF SALES SPENT IN THE SUPPLY CHAIN PRESENT NET PROFIT OF FIRM 30% 40% 50% 60% 70% 80% 2 $2.78 $3.23 $3.85 $4.76 $6.25 $9.09 4 $2.70 $3.13 $3.70 $4.55 $5.88 $8.33 6 $2.63 $3.03 $3.57 $4.35 $5.56 $7.69 8 $2.56 $2.94 $3.45 $4.17 $5.26 $7.14 10 $2.50 $2.86 $3.33 $4.00 $5.00 $6.67

Using Table 11.3, determine the sales necessary to equal a dollar of savings oon purchases for a company that has: a. A net profit of 6% and spends 60% of its revenue on purchases b. A net profit of 8% and spends 80% of its revenue on purchases. $4.35 (See table above) $7.14 (See table above)

12.1 George Walker has complied the following table of six items in inventory along with the unit cost and the annua demand in units

annual identification demand in code unit cost ($) units XX1 $5.84 1,200 B66 $5.40 1,110 3CPO $1.12 896 33CP $74.54 1,104 R2D2 $2.00 1,100 RMS $2.08 961 Using ABC analysis, which item(s) should be carefully controlled using a quantitative inventory technique and which item(s) should not be closely controlled? annual demand in annual % of Total units demand in $ $ Volume Rank 1,200 $7,008.00 6.97% 1,110 $5,994.00 5.96% 896 $1,003.52 1.00% 1,104 $82,292.16 81.89% 1,100 $2,200.00 2.19% 961 $1,998.88 1.99% Total $100,496.56 100.00%

identification code XX1 B66 3CPO 33CP R2D2 RMS

unit cost ($) $5.84 $5.40 $1.12 $74.54 $2.00 $2.08

2 3 6 1 4 5

Items Items

33CP R2D2

XX1 RMS

B66 3CPO

should be carefully controlled using a quantitative invent should not be closely controlled

12.5 William Beville's computer training school, in Richmond, stsocks workbooks with the following characteristics: Demand D = 19,500 units/year Ordering cost S = $25/order Holding cost H = $4/unit/year a. Calculat the EOQ for the workbooks b. What are the annual holding costs for the workbooks c. What are the annual ordering costs a. Calculat the EOQ for the workbooks 19500 units/year D=

Demand Ordering cost holding cost

S= H= EOQ=√(2 DS)/H= Answer EOQ=

$25 per order $4 /unit/year

494 =√(2*19500*25/4) 494

b. What are the annual holding costs for the workbooks Annual holding cost= 1/2 * EOQ * H= Answer: Annual holding cost= $988 $988 =(1/2)*494*4

c. What are the annual ordering costs No of orders=D/EOQ= Ordering Cost=S= Annual Ordering cost= Answer: Annual ordering cost= 40 =19500/494 $25 $1,000 =40*25 $1,000

Note: For EOQ Annual Holding cost and annual ordering cost should be equal. However because of rounding off errors

12.13 Joe Henry's machine shop uses 2,500 brackets during the course of a year. These brackets are purchased from the following information is known about the brackets. annual demand holding cost per bracket per year order cost per order Lead time working days per year a. b. c. d. e.

2,500

$1.50 $18.75 2 days 250

Given the above information, what would be the economic order quanity (EOQ)? Gicen the EOQ, what would be the average inventory? What would be the annual inventory hold cost? Given the EOQ, how many orders would be made each year? What would be the annual order cost? Given the EOQ, what is the total annual inventory cost? What is the time between orders?

a. Given the above information, what would be the economic order quanity (EOQ)?

D= S= H= EOQ=√(2 DS)/H= Answer EOQ=

2500 units/year $18.75 per order $1.50 /unit/year

Demand Ordering cost holding cost

250 =√(2*2500*18.75/1.5) 250

b. Gicen the EOQ, what would be the average inventory? What would be the annual inventory hold cost? Average inventory= EOQ/2= 125 =250/2 $187.50 =125*1.5

Annual inventory hold cost=Average inventory * holding cost=

Answer: Annual holding cost=

$187.50

c. Given the EOQ, how many orders would be made each year? What would be the annual order cost?

No of orders=D/EOQ= Ordering Cost=S= Annual Ordering cost= Answer: Annual ordering cost=

10 =2500/250 $18.75 $187.50 =10*18.75 $187.50

e. What is the time between orders?

working days per year=

250

Annual demand= working days per year= Therefore Daily demand=

2500 250 10 =2500/250

Since EOQ= 250 Cycle time= Time between orders=EOQ/Daily demand=

25 days

Answer: Time between orders=

25 days

f. What is the reorder point (ROP)? Lead time= Daily demand= 2 10 20 days

Therefore reorder point (ROP)=Lead time * Daily Demand=

Answer: reorder point (ROP)=

20

12.19 Cesar Rogo Computers,a Mississippi chain of computer hardware and software retail outlets, supplies both educational and commercial customers with memory and storage devices. It currently faces the following order decision related to purchase of DC-ROMs: D= 36,000 Disks S= $25 H= $0.45 Purchase price = P $0.85 Discount price = $0.82 Quantity needed to qualify for the discount =

6,000

disks

Should the discount be taken?

D= S= H= EOQ=√(2 DS)/H=

36,000 units/year $25.00 per order $0.45 /unit/year

Demand Ordering cost holding cost

2000 =√(2*36000*25/0.45)

The annual total cost is: TC = purchase costs + order costs + holding costs = PD +SD/Q +H(Q/2) where Q is the order quantity =36000P +(36000/Q) 25 + (Q/2)0.45 Quantity ordered Q 2000 6000 Price P Purchase Order Cost Holding Total Cost Remarks costs Cost 0.85 30600 450 450 31500 EOQ quantity 0.82 29520 150 1350 31020 Quantity at which discount is offered

Total annual cost if discount is taken is less than the total annual cost for EOQ quantity Hence discount should be taken

Answer:

discount should be taken

THROUGH THE SUPPLY CHAIN

90% $16.67 $14.29 $12.50 $11.11 $10.00

chases for a company that has: (See table above) (See table above)

with the unit cost and the annual

nventory technique

ontrolled using a quantitative inventory technique

ollowing characteristics:

ver because of rounding off errors this is not so

ese brackets are purchased from a supplier 90 miles away.

inventory hold cost? annual order cost?

nnual inventory hold cost?

e the annual order cost?

e retail outlets, supplies both urrently faces the

Remarks EOQ quantity Quantity at which discount is offered

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