1. Demand for vitamins is 10,000 bottles per month.

DO incurs a fixed order placement,

transporta- tion, and receiving cost of $100 each time it places an order for vitamins with
the manufacturer. DO incurs a holding cost of 20 percent. The manufacturer charges $3
for each bottle of vitamins purchased. Evaluate the optimal lot size for DO.

Each time DO places an order, the manufacturer must process, pack, and ship the order.
The manufacturer has a line packing bottles at a steady rate that matches demand. The
manufac- turer incurs a fixed-order filling cost of $250, production cost of $2 per bottle,
and a holding cost of 20 percent. What is the annual fulfillment and holding cost incurred
by the manufacturer as a result of DO’s ordering policy?

2. Harley purchases components from three suppliers. Compo- nents purchased from
Supplier A are priced at $5 each and used at the rate of 20,000 units per month.
Components pur- chased from Supplier B are priced at $4 each and are used at the rate of
2,500 units per month. Components purchased from Supplier C are priced at $5 each and
used at the rate of 900 units per month. Currently, Harley purchases a separate truckload
from each supplier. As part of its JIT drive, Harley has decided to aggregate purchases
from the three suppliers. The trucking company charges a fixed cost of $400 for the truck
with an additional charge of $100 for each stop. Thus, if Harley asks for a pickup from
only one supplier, the truck- ing company charges $500; from two suppliers, it charges
$600; and from three suppliers, it charges $700. Suggest a replenishment strategy for
Harley that minimizes annual cost. Assume a holding cost of 20 percent per year.
Compare the cost of your strategy with Harley’s current strategy of ordering separately
from each supplier. What is the cycle inventory of each component at Harley?

3. Amie store sells candy boxes. Demand for A1 candy is 2400 boxes per month. Amie
records a fixed costs of 4000 VND for each replenishment order it places. Each candy
box costs 300 VND. The retailer has a holding cost of 20%.
a. Calculate EOQ and the total cost?
Additionally, Amie sells A2 candy box that has Demand A2 = 2600 boxes per month.
Each A2 candy box costs 240 VND. The retailer has a holding cost of 20%. A fixed
transportation cost of 1500 VND is incurred each time an order is delivered. An additional fixed
cost of 500 VND each product is happened for receiving and loading products. Company has
decided to make order for both A1 and A2 candy each time they place an order.
b. Calculate the optimal lot size and the optimal lot size for each candy box.
c. Calculate the TC when the company makes the order.