+1-415-670-9189
info@expertsmind.com
Compute the optimal order quantity
Course:- Operation Management
Reference No.:- EM13386




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Operation Management

Sturdivant Sound Systems manufactures and sells sound systems for both home and audio. All parts of the sound systems, with the exception of DVD players, are produced in the Rochester, New York, plant. DVD players used in the assembly of Sturdivant's systems are purchased from Morris Electronics of Concord, New Hampshire.

 Sturdivant purchasing agent Mary Kim submits a purchase requisition for the DVD players once every four weeks. The company's annual requirements total 5,000 units (20 per working day), and the cost per unit is $60. (Sturdivant does not purchase in greater quantities because Morris Electronics does not offer quantity discounts.)  Because Morris promises delivery within one week following receipt of a purchase requisition, rarely is there a shortage of DVD players. (Total time between date of order and date of receipt is 5 days).

Associated with the purchase of each shipment are procurement costs. These costs, which amount to $20 per order, include the costs of preparing the requisition, inspecting and storing the delivered goods, updating inventory records, and issuing a voucher and a check for payment. In addition to procurement costs, Sturdivant incurs inventory carrying costs that include insurance, storage, handling, taxes, and so forth. These costs equal $6 per unit per year.

Beginning in August of this year, management of Sturdivant Sound Systems will embark on a company-wide cost control program in an attempt to improve its profits. One area to be closely scrutinized for possible cost savings is inventory procurement.

1. Compute the Optimal Order quantity of DVD players.

2. Determine the appropriate reorder point (in units).

3. Compute the costs savings that the company will realize if it implements the optimal order inventory procurement decision.

4. Should procurement costs be considered a linear function of the number of orders?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Operation Management) Materials
Summarize the provisions of OSHA's Control of Hazardous Energy standard (1910.147). List three or four types of hazardous energy that should be considered when authoring a con
Explain the smoothing effect found in simple moving ave, weighted moving ave., exponential smoothing. Explain the similarity between alpha in exponential smoothing and the dis
What are the five propositions of the Davis model of corporate social responsibility? Which proposition would be the most valuable to you as a manager in guiding your social
A company's average costs and revenues for a typical month are 14.12 million and 17.39 million respectively. It is estimated that 40% of the costs are variable, and the rest i
The Krewe of Orpheus maintains a supply of swizzle sticks for events throughout the year. Demand for swizzle sticks is shockingly low, a quick check of krewe records from last
Abercrombie & Fitch, once the favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines
I need help with a 600 words summary on "Nokia's Evolving Organizational Structure" on what changes has Nokia introduced in terms of division of labor in organizational struct
To reduce safety stock, should the cross-dock facility be closer to the factory or the retail outlets. For this purpose, analyze the impact of increasing L1 and therefore d