Please show your calculations and round to FOUR decimal places.

A retailer needs to choose between two suppliers for one of its products. The only criterion used for the decision is the cost. The following information about the product is available:

Demand 200 a week
Ordering cost (for all suppliers) $75 per order
Holding cost 20% of the unit cost
Working weeks 50 a year

The retailer has narrowed down the choices to two suppliers. The following shows the price-break schedule for each supplier:
SUPPLIER A SUPPLIER B
Quantity Unit Price Quantity Unit Price
1-299 $14.00 1-249 $14.10
300-699 13.80 250-449 13.90
700+ 13.60 450+ 13.70

A. Which supplier should the retailer choose? Explain and support your answer with appropriate calculations.
B. What is the optimal lot size for the item? (Note: There has to be only ONE choice, regardless of supplier).
C. What is the total annual cost of inventory for the chosen (best) lot size?

Solution Preview

Operations Management - Inventory Management Quantity Discount
Please show your calculations and round to FOUR decimal places.
A retailer needs to choose between two suppliers for one of its products. The only criterion used for the decision is the cost. The following information about the product is available:
Demand 200 a week
Ordering cost (for all suppliers) $75 per order
Holding cost 20% of the unit cost
Working weeks 50 a year
The retailer has narrowed down the choices to two suppliers. The following shows the price-break schedule for each supplier:
SUPPLIER A SUPPLIER B
Quantity Unit Price Quantity Unit Price
1-299 $14.00 1-249 $14.10
300-699 13.80 250-449 13.90
700+ 13.60 450+ 13.70
A. Which supplier should the retailer choose? Explain and support your answer with appropriate calculations.
B. What is the optimal lot size for the item? (Note: There has to be only ONE choice, regardless of supplier).
C. What is the total annual cost of inventory for the chosen (best) lot size?

D = 200
Ordering Cost = CO = 75
Holding Cost = CH = .20

Let's calculate the Annual Demand
Annual Demand = Weekly Demand X Number Operation Weeks Per Year
D ...

Solution Summary

Inventory management has two main types of quantity discount models. We examine the all units discounts to determine which supplier to select and the best ordering quantity.

Mr. David Mueller is a reseller of sports shoes. The supplier of shoes offers discounts depending on quantity ordered. Following are the discount slabs:
Order quantity Cost per shoe pair ($)
1-799 4.40
800-1199 4.00
1200+ 3.60
Mr. David needs to decide how many shoe pairs should be ordered to keep total cost minimum. He h

1 < Q < 1000 unit => $5.00
1000 <= Q < 2000 units => $4.90
2000 <= Q units => $4.75
The discounts apply to all units. For each of the following items treated separately, what is the appropriate order quantity to use, assuming a common value of r = 0.3 (Holding cost is 30 percent of the unit cost)?
Item

I can't find anywhere in my textbook a "direct" answer to this question. I tend to think that it's neither true nor false, because quantitydiscounts can be a form of price discrimination under certain circumstances. I guess I just need confirmation. Can someone please give me guidance on this question?
"Quantitydiscounts

John Lindsay sells disks that contain 25 software packages that perform a variety of financial functions including net present value, internal rate of return, and other financial programs tpically used by business students majoring in finance. Depending on the quantity ordered, JOhn offers the following price discounts. The annu

Lott Manufacturing Inc. has been ordering parts for its production process in lots of 10,000 units. Each order costs the firm $50 to place, and holding costs per unit average $3. Lott uses 200,000 units every 250 days.
Lott Manufacturing was recently approached by its supplier with a new quantity discount program. The supplie

Keith Shoe Stores carries a basic black men's dress shoe that sells at an approximate constant rate of 500 pairs of shoes every three months. Keith's current buying policy is to order 500 pairs each time an order is placed. It costs Keith $30 to place an order. The annual holding cost rate is 20%. With the order quantity of 500,

Please help with the following problem regarding inventorymanagement.
The Acme Grocery store started a Coupons Instantly program. It requires a debit card with a minimum of $300, so the customer can buy as many coupons as they want. As a promotional gimmick they are offering pens. The pens are given away to new coupon holde

(5). Which of the following is not a common source of prices for a price analysis?
(a). Catalog prices,
(b). Internet prices,
(c). The grapevine,
(d). Independent cost estimates.
(6). Which of the following is not a category of discounts?
(a). Trade discounts,
(b). Quantitydiscounts,
(c). Credit card d

Standard Manufacturing Corporation (SMC) buys sheet metal from a dedicated supplier for use in its operations. On average, SMC uses 100 square yards (a square yard of metal is commonly referred to as simply a yard) of sheet metal per day. The cost of placing an order for sheet metal is $100. The sheet metal costs $1.50 per yard.