Arizona Health Services (AHS), a large hospital system, dispenses 250,000 bottles of brand name pharmaceuticals annually in one of its hospitals (assume a constant daily demand). The optimal safety stock, which is on hand initially, is 1,000 bottles. Each bottle costs $10, the holding cost is $.10/unit, and the cost of placing an order with the supplier is $175. Assume an interest rate of 5% and a lag time of 5 days. What is the economic order quantity? Question 1 options: A) 1,000 B) 2,475WRONG*** C) 4,950 D) 7,071 Save Question 2 (1 point) Note: For questions 1–3, refer to the following scenario: Arizona Health Services (AHS), a large hospital system, dispenses 250,000 bottles of brand name pharmaceuticals annually in one of its hospitals (assume a constant daily demand). The optimal safety stock, which is on hand initially, is 1,000 bottles. Each bottle costs $10, the holding cost is $.10/unit, and the cost of placing an order with the supplier is $175. Assume an interest rate of 5% and a lag time of 5 days. What is the total cost of the pharmaceuticals? Question 2 options: A) $2,503,166 B) $2,506,187 C) $2,508,308RIGHT*** D) $5,016,616 Save Question 3 (1 point) Note: For questions 1–3, refer to the following scenario: Arizona Health Services (AHS), a large hospital system, dispenses 250,000 bottles of brand name pharmaceuticals annually in one of its hospitals (assume a constant daily demand). The optimal safety stock, which is on hand initially, is 1,000 bottles. Each bottle costs $10, the holding cost is $.10/unit, and the cost of placing an order with the supplier is $175. Assume an interest rate of 5% and a lag time of 5 days. What is the re-order point for the pharmaceuticals? Question 3 options: A) 684 B) 2,054 C) 3,424 D) 4,424WRONG***
Annual demand of bottles = D = 250,000
Order placement cost = Co = $175
Holding cost per unit per year = Ch = $0.10
Therefore ,
Economic Order Quantity ( EOQ )
= square root ( 2 x Co x D/Ch )
= square root ( 2 x 175 x 250,000 / 0.10)
= 29580.39 ( 29580 rounded to nearest whole number )
Hence,
Annual ordering cost
= Ordering cost per order x Number of orders
= Ordering cost per order x Annual demand/EOQ
= $ 175 X 250000/29580
= $1479.03 ( $1479 rounded to nearest integer)
Annual inventory holding cost
= Holding cost per unit per year x average inventory
= Holding cost per unit per year x ( EOQ/2 + safety stock)
= $0.10 x ( 29580 /2 + 1000)
= $0.10 x ( 14790+ 1000)
= $0.10 x 15790
= $1579
Annual cost of bottles
= Cost/ bottle x annual demand of bottles
= $10 x 250,000
= $2500,000
It is to be noted that “Total cost of pharmaceuticals” has not been defined in the problem.
Therefore , we define :
Total cost of pharmaceuticals
= Annual ordering cost + Annual inventory holding cost + annual cost of bottles
Therefore,
Total cost of pharmaceuticals
= $ 1479 + $1579 + $ 2500,000
= $2503058
|
TOTAL COST OF PHARMACEUTICALS = $2503058 |
Arizona Health Services (AHS), a large hospital system, dispenses 250,000 bottles of brand name pharmaceuticals annually...