Question

Discussion Question _ Inventory Control Part a The Deli University Gift Shop purchases sweatshirts emblazoned with the school name and logo from a vendor in Spain Town at a cost of $2,000 each. The annual holding cost for a sweatshirt is calculated as 1.5% of the purchase cost. It costs the Gift Shop $500 to place a single order. The Gift Shop manager estimates that 900 sweatshirts will be sold during each month of the upcoming academic year. i) Determine the highest number of shirts that should be purchased by the Gift Shop in order to minimize stock administration costs. ii) What is the number of orders to be placed each year? iii) Compute the average annual ordering cost iv) Compute the average annual carrying cost v) Compute the total stock administration cost Part b The maximum sale for the Gift Shop for any one week is 300 sweatshirts and minimum sales 150 sweatshirts. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. Using the EOQ policy, determine the re-order level, minimum inventory level and maximum inventory level for the business,

Answer 1

Hence solved first subquestion

Part -a i) The highest purchased number by the of butt hists shop that in should order be to minimize calculated by stock adminstration tOQ (Economic order cost can Quantity). EOQ = J2AO where, A = o = Annual demand Ordering cost per order per unit per cost annum. c = carrying 2x10800x500 30 108ooooo 30 600 units

here is the working note for solution of first sub question

Working notes's A = 900 x 12 = 10800 0 - 500$ (given) c = 2000x 1.5% = 30$

ei) Number of anders to be placed each year: of Number arders = Total requirement annual EOQ 10800 600 = 18 orders
second subquestion is done in this page!
-ii) Average annual Ordering cost :- Average annual ordering cost = Number of anders x ordering cost/onder 500 X 18 4500$ iv) Average annual careying Cost'; umber of shiets in a batch cost = Average careying x carrying cost 600x30 9000 $
Third and fourth subpart is done here..

Notes:-

× sign represents *( multiply).