Question

Keith Shoe Stores carries a basic black dress shoe for men that sells at an annual demand of 2000 pairs. Keith's current buying policy is to order 500 pairs each time an order is placed. An order costs Keith $30 to place. The annual carrying cost for each pair over a one year period is 20% of the price of a pair that Keith pays. At the order quantity of 500 pairs, Keith pays the lowest possible unit price of $28 per pair that the supplier could offer. Other quantity discounts offered by the supplier are given in the following table. Order Quantity Unit Price Up to 199 $32 200 up to 299 $30 300 and more $28 If Keith is willing to pay a unit price of $30.00, determine the actual order quantity if it takes the advantage of the quantity discounts. O 146 O 141 O 200 O 199 O None of the above

Answer 1

Inventory management refers to the process by which inventory and stock items are supervised. Economic Order Quantity is the number of unit that is added to the inventory which minimize the total inventory cost. It maintain a balance between ordering costs and carrying costs.

D = 2000 pains : 500 bains 5 = $30/order H = 20% of price or 0.20 of price Ordix quantity up to 199 8 200 to 299 1300 and more unit price Holding cost 321 0.208 32 = $6.4 $30 0·20x 30= $600 $28 10.20 × 28 = 35.6 EOR - 2D5 Ін EOQ = / 2 x 2000 x 30 6.4 = 136.93 or This is feasible 137 units 2x 2000 x 30 V 6°0 = 141.42 or This is not feasible 141 units EOQ = /2x 2000 x 30 v 56 = 146.38 or 146 units not feasible. This is Now we should calculate the the botal cost of break-even total cost of EOBI & point (200 & 300 units).

Annual product Cost Total cast Annual on Annual ho cast Tohl cost , Annual ondeving + Bunual Holding + brincand puedeus Te = (B x 3) + ( xH) + (PXD) To 9 = (29 x 3o) + (122x6•4) + (32X 2000) = 437°956 + 438.40+ 64000 = 64,876.356 or 1964,876.36 Termo f 2900 x 30) + (20 x 6°C) + (30 x 200) = 300 + 600 + 60000 - $ 60,900 T600 =(2900 x 36) + (390456) + ( 28 x 2000) = 200 + 560 + 56000 = $ 56,760 Since the total cost of 300 units is less, /30 the optimal order quantity is 300 of Keith is willing to pay a unit price of $30.00 the actual ander quantity is (200 units Answer of Keith is willing to pay a unit price of $2800 the actual order quantity is 300 to the answer is [None of the above ?

price of 832.00, the of Keith total cost is is willing to pay a a 64,816. 36). pay of 4 30000 if Keith is willing to the total cost & a unit price 860,900.00