please show all work.

Chapter 11
11.7 pg 431

TABLE 11.3 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 $4.35 (See table above)
b. A net profit of 8% and spends 80% of its revenue on purchases. $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
identification demand in annual % of Total
code unit cost ($) units demand in $ $ Volume Rank
XX1 $5.84 1,200 $7,008.00 6.97% 2
B66 $5.40 1,110 $5,994.00 5.96% 3
3CPO $1.12 896 $1,003.52 1.00% 6
33CP $74.54 1,104 $82,292.16 81.89% 1
R2D2 $2.00 1,100 $2,200.00 2.19% 4
RMS $2.08 961 $1,998.88 1.99% 5
Total $100,496.56 100.00%
Items 33CP XX1 B66 should be carefully controlled using a quantitative invent
Items R2D2 RMS 3CPO 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

D= 19500 units/year Demand
S= $25 per order Ordering cost
H= $4 /unit/year holding cost

EOQ=√(2 DS)/H= 494 =√(2*19500*25/4)

Answer EOQ= 494

b. What are the annual holding costs for the workbooks

Annual holding cost= 1/2 * EOQ * H= $988 =(1/2)*494*4

Answer: Annual holding cost= $988

c. What are the annual ordering costs

No of orders=D/EOQ= 40 =19500/494
Ordering Cost=S= $25
Annual Ordering cost= $1,000 =40*25

Answer: Annual ordering cost= $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 2,500
holding cost
per bracket
per year $1.50
order cost per
order $18.75
Lead time 2 days
working days
per year 250

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

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

D= 2500 units/year Demand

S= $18.75 per order Ordering cost
H= $1.50 /unit/year holding cost

EOQ=√(2 DS)/H= 250 =√(2*2500*18.75/1.5)

Answer EOQ= 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

Annual inventory hold cost=Average inventory * holding cost= $187.50 =125*1.5

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= 10 =2500/250
Ordering Cost=S= $18.75
Annual Ordering cost= $187.50 =10*18.75

Answer: Annual ordering cost= $187.50

e. What is the time between orders?

working days
per year= 250

Annual demand= 2500

working days
per year= 250
Therefore Daily demand= 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= 2 days

Daily demand= 10

Therefore reorder point (ROP)=Lead time * Daily Demand= 20

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= 36,000 units/year Demand

S= $25.00 per order Ordering cost
H= $0.45 /unit/year holding cost

EOQ=√(2 DS)/H= 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 Price
ordered
Q P Purchase Order Cost Holding Total Cost Remarks
costs Cost
2000 0.85 30600 450 450 31500 EOQ quantity
6000 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