Please answer question G. and please tell me step by step how you got your answe
ID: 2563943 • Letter: P
Question
Please answer question G. and please tell me step by step how you got your answer!
Joe Birra needs to purchase malt for his micro-brew production. His supplier charges $40 per delivery (no matter how much is delivered) and $1.2 per gallon. Joe’s annual holding cost is 25% of the price per gallon. Joe uses 200 gallons of malt per week. a. Suppose Joe orders 125 gallons each time. What is his average inventory? 63 gallons (Round your answer to 2 decimal places.) b. Suppose Joe orders 2000 gallons each time. How many orders does he place with his supplier each year? 5.20 orders c. How many gallons should Joe order from his supplier with each order to minimize the sum of ordering and holding costs? 1,665 gallons (Round your answer to 3 decimal places.) d. Suppose Joe orders 2250 gallons each time he places an order with the supplier. What is the sum of ordering and holding costs per gallon? $0.050 per gallon (Round your answer to 2 decimal places.) e. Suppose Joe orders the quantity from part (c) that minimizes the sum of the ordering and holding costs each time he places an order with the supplier. What is the annual cost of the EOQ expressed as a percentage of the annual purchase cost? 4.00 % f. If Joe’s supplier only accepts orders that are an integer multiple of 1,000 gallons, how much should Joe order to minimize ordering and holding costs per gallon? 2,000 gallons g. Joe’s supplier offers a 3.00% discount if Joe is willing to purchase 8000 gallons or more. What would Joe’s total annual cost (purchasing, ordering and holding) be if he were to take advantage of the discount?Explanation / Answer
Solution : G
Joe weekly Malt requirement = 200 Gallon
Joe Annual Malt Requirment = 200 * 52 = 10400 gallon
Price of Malt = $1.2/gallon
Supplier offer discount of 3% if joe is willing to purchase 8000 gallons or more. Therefore Joe is required to take advantage of discount then he must buy 8000 gallons or more in a single order. Let us suppose that joe buy 10400 gallon in a single order.
Therefore, annual purchase cost = 10400*1.2*97% = $12105.60
Ordering Cost = $40 for 1 order only
Holding Cost = 25% of price per gallon
Therefore annual holding cost = 10400*1.2*25% = $3120
Total Annual Cost = Purchasing Cost + Ordering Cost + Holding Cost
= $12105.60 + $40 + $3120 = $15265.60