Reference no: EM131725397

Mr. Busfieldis, a distribution center manager for Hogan Kitchenwares, recently completed a course in supply chain management and now realizes that there are significant cost associated with ordering and maintaining inventory at his distribution center. Mr. Busfield has learned that EOQ is the replenishment logic that minimizes these costs. In an effort to find the EOQ for measuring cups, Mr. Busfield has gathered relevant data. He expects to sell 44,000 measuring cups this year. Hogan acquires the measuring cups for 75 cents each from Shatter Industries. Shatter charges $8 for processing each order. In addition, Mr. Busfield estimates his company’s inventory carrying cost to be 12% annually. a) Find Mr. Busfield’s EOQ for measuring cups. Assume that Mr. Busfield accepts ownership of products upon arrival at his DC. b) Now assume that Mr. Busfield must arrange for inbound transportation of the measuring cups since Hogan accept ownership of products at the supplier’s shipping point. Quantities of fewer than 4,000 measuring cups cost 5 cents per unit to ship. Quantities of 4,000 and above cost 4 cents per unit to ship. Determine the difference in total cost associated with an EOQ of 4,000 units and the EOQ level found in part (a) when transportation cost must be considered. c) Given information above and the low cost EOQ alternative determined in part (b), use periodorder-quantity logic to determine number of orders Hogan would place each year for measuring cups and the time interval between orders. In Excel.