Reference no: EM132548761

Everett Mann's Dream Store sells waterbeds and supplies. The best-selling bed in the store has an an- nual demand of 400 units. The ordering cost is $40, while the holding cost is $5 per unit per year. There are 250 working days per year, and the lead-time is 6 days. To minimize total cost, how many units should be ordered each time an order is placed? If price would drop from $15 per bracket to $14.50 per bracket if Ross would purchase the brackets in lots of 1,000. Lead times, however, would increase to 3 days for this larger quantity.

Question (a) What is the total annual inventory cost plus pur- chase cost if Ross buys the brackets in lots of 1,000 at $14.50 each?

Question (b) If Ross does buy in lots of 1,000 brackets, what is the new ROP?

Question (c) Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?