- 7 A College Bookstore Is Attempting To Determine The Optimal Order Quantity For A Popular Book On Psychology The Store 1 (71.4 KiB) Viewed 17 times
7. A college bookstore is attempting to determine the optimal order quantity for a popular book on psychology. The store sells 5,000 copies of this book a year at a retail price of $12.50, and the cost to the store is 20 percent less, which represents the discount from the publisher. The store figures that it costs $1 per year to carry a book in inventory and $100 to prepare an order for new books. a. Determine the total inventory costs associated with ordering 1, 2, 5, 10, and 20 times a year. b. Determine the economic order quantity. c. What implicit assumptions are being made about the annual sales rate? 8. The Hedge Corporation manufactures only one product: planks. The single raw material used in making planks is the dint. For each plank manufactured, 12 dints are required. Assume that the company manufactures 150,000 planks per year, that demand for planks is perfectly steady throughout the year, that it costs $200 each time dints are ordered, and that carrying costs are $8 per dint per year. a. Determine the economic order quantity of dints. b. What are total inventory costs for Hedge (total carrying costs plus total ordering costs)? c. How many times per year would inventory be ordered? 9. A firm that sells 5,000 blivets per month is trying to determine how many blivets to keep in inventory. The financial manager has determined that it costs $200 to place an order. The cost of holding inventory is 4 cents per month per average blivet in inventory. A five-day lead time is required for delivery of goods ordered. (This lead time is known with certainty.) a. Develop the algebraic expression for determining the total cost of holding and order- ing inventory. b. Plot the total holding costs and the total ordering costs on a graph where the hori- zontal axis represents size of order and the vertical axis represents costs. c. Determine the EOQ from the graph.