Question

Homework: Chapter 12 Save Score: 0.5 of 2 pts 13 of 24 (24 complete) Hw Score: 88.08%, 37.88 of 43 pts Question Help %) Problem 12.22 Bell Computers purchases integrated chips at $350 per chip. The holding cost is $35 per unit per year, the ordering cost is $117 per order, and sales are steady at 395 per month. The company's supplier, Rich Blue Chip Manufacturing, Inc decides to offer price concessions in order to attract larger orders. The price structure is s hown below. Rich Blue Chip's Price Structure Quantity Purchased 1-99 units 100-199 units 200 or more units Price/Unit S350 S325 S300

a) What is the optimal order quantity and the minimum annual cost for Bell Computers to order, purchase, and hold these integrated chips?

The optimal order quantity after the change in pricing structure is ________ units (enter your response as a whole number).

The total annual cost for Bell computers to order, purchase, and hold the integrated chips is $____________ (round your response to the nearest whole number).

b) Bell Computers wishes to use a 10% holding cost rather than the fixed $36 holding cost in part a. What is the optimal order quantity, and what is the optimal annual cost?

The optimal order quantity after the change in the holding cost calculation is_______ units (enter your response as a whole number).

The total annual cost for Bell computers to order, purchase, and hold the integrated chips is $__________ (round your response to the nearest whole number).

Answer 1

DEMAND	HOLDING COST	ORDERING COST	EOQ
4740	36	117	176

EOQ = SQRT(2DS/H)

TOTAL COST OF INVENTORY = DEMAND * PRICE PER UNIT + ((ADJUSTED Q / 2) * HOLDING COST) + ((DEMAND / ADJUSTED Q) * ORDERING COST

NO.	FROM QUAN	TO QUAN	PRICE	HOLDING	EOQ	ADJUSTED Q	TOTAL COST OF INVENTORY
1	1	99	350	36	176	99	1666383.818
2	100	199	325	36	176	176	1546819.023
3	200	MORE	300	36	176	200	1428372.9

Based on the above table, the optimal order quantity is 200 units with the total cost of inventory at $1428373

FOR CASE 2 WE HAVE THE FOLLOWING VALUES:

DEMAND	HOLDING COST	ORDERING COST
4740	10%	117

Since the holding cost needs to be adjusted per unit price basis, we will have different EOQ value for each quantity.

The adjusted Q would need to be done based on the following EOQ values:

NO.	FROM QUAN	TO QUAN	PRICE	HOLDING	EOQ	ADJUSTED Q	TOTAL COST OF INVENTORY
1	1	99	350	35	178	99	1666334.318
2	100	199	325	32.5	185	185	1546503.98
3	200	MORE	300	30	192	200	1427772.9

The optimum order quantity, in this case, is 200 units, and the total cost of inventory has changed to $1427774