The Western Jeans Co. purchases denim from Cumberland TextileMills. The Western

Question

The Western Jeans Co. purchases denim from Cumberland TextileMills. The Western Jeans Co. uses 35,000 yards of denim peryear to make jeans. The cost of ordering denim from thetextile company is $500 per order. It costs Western $0.35 peryard annually to hold a yard of denim in inventory:
a) Determine the optimal number of yards of denim the WesternJeans Co. should order, b) the minimum total annual inventory cost, c) the optimal number of orders per year, and d) the optimal time between orders. The Western Jeans Co. purchases denim from Cumberland TextileMills. The Western Jeans Co. uses 35,000 yards of denim peryear to make jeans. The cost of ordering denim from thetextile company is $500 per order. It costs Western $0.35 peryard annually to hold a yard of denim in inventory:
a) Determine the optimal number of yards of denim the WesternJeans Co. should order, b) the minimum total annual inventory cost, c) the optimal number of orders per year, and d) the optimal time between orders.

Explanation / Answer

A)total optimal no of yards Q=(2R(C3)/(C1) Q=(2*$35000*500)/.35=10,000 where R=DEMAND,C3=ORDERING COST=500,C1=HOLDINGCOST= .35 B)the minimum total annual inventory cost,=(1/2(Q*T)C1+C3)/T=(.5(10000*4*.35)+500)/4=$7125             C)NO .OF. ORDERS T=R/Q=$35,000/10,000=3.5 NEARLY 3 OR 4ORDERS(CONSIDER 4 ORDERS AS PER YEAR) D)the optimal time between orders.=365/4=91.25DAYS

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