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Ops Mgmt EOQ & Supply Chain

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With each answer, please provide a written description of what you did, and why. Also why are answers B and C the same? The answers for each question are provided in brackets, I'm interested in the mechanics and explanation of how to get the answers.

Question

- Staples purchases computer desks from Office Desk
Industries.
- Average Desk Cost: $80 dollars to Office Desk and sold to
Staples for $200.
- The annual demand is 2,400 desks.
- The fixed ordering costs are $1000 for Staples and $2000 for Office Desk
- Both companies have a holding cost of 20%.
- The supply chain is not coordinated and Office Desk ships whatever Staples order.

a) Assuming that Staples determines the order size that minimize its own
cost, what is the total holding and ordering costs in the supply chain?
(Answer: 30,497)

b) If Office Desk and Staples were integrated what would be the optimal
order size and the total cost? (Answer: 507 & 28,397)

c) Suppose that Office Desk is considering coordinating the supply chain in
order to minimize the supply chain costs. What would be the total cost in
the supply chain as a result? (Answer: 28,397)

Thank you!!

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Solution Summary

Calculating the EOQ and the total ordering and holding costs

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