Time and Order-processing Costs Essay Example for Free

Time and Order-processing Costs EssayAfter making some advisable short-term investments at a race track, Chris woeful had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so depleted bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,000 kegfuls, and they were sell to retail customers in an even flow. Low was uncertain of how many nails to order at any time. Initi every(prenominal)y, besides two costs concerned him order-processing costs, which were $60 per order without regard to size, and warehousing costs, which were $1 per year per keg space. On average, the rented store space is only half full. This meant that Low had to rent a constant do of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Lo w bought his nails on a delivered basis. research 1 Using the EOQ methods sketch in Chapter 9, determine how many kegs of nails Low should order at one time.Question 2 Assume that whole conditions in Question 1 hold, except that Lows supplier now offers a quantity discount in the form of absorbing all or part of Lows order-processing costs. For orders of 750 or more kegs of nails, the supplier will absorb all order-processing costs for orders between 249 and 749 kegs, the supplier will absorb half. What is Lows late EOQ? (It might be useful to lay out all costs in tabular form for this and later questions.)Question 3 Temporarily skip your work on Question 2. Assume that Lows warehouse offers to rent Low space on the basis of the average number of kegs that Low will collapse in stock, rather than on the maximum number of kegs that Low would need room for whenever a red-hot shipment arrived. The storage charge per keg remains the same. Does this change the answer to Question 1? If so, what is the new answer?Question 4 Take into account the answer to Question 1 and the suppliers new policy outlined inQuestion 2, and the warehouses new policy inQuestion 3. Then determine Lows new EOQ.Question 5 Temporarily ignore your work on Questions 2, 3, and 4. Lows luck at the race track is over he now must borrow money to finance his inventory of nails. Looking at the situation outlined in Question 1, assume that the wholesale cost of nails is $40 per keg and that Low must comport interest at the rate of 1.5% per month on unsold inventory. What is his new EOQ?Question 6 victorious into account all of the factors listed in Questions 1, 2, 3, and 5, calculate Lows EOQ for kegs of nails.