Michigan State Figurine Incorporated (MSF) sells crystal figurines to Spartan fans. MSF buys the figurines from a manufacturer for $10 per unit. It sends orders electronically to the manufacturer, costing $20 per order, and it experiences an average lead time of eight days for each order to arrive from the manufacturer. Its inventory carrying cost is 20 percent. The average daily demand for the figurines is two units per day. MSF is open for business 250 days a year. The supplier decides to offer a volume discount. It will sell the crystal figurines at $8 per unit for orders of 250 units or more. Answer the following questions: a. How many units should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time. b. How many orders will it place in a year? c. What is the average inventory? d. What is the annual ordering cost? e. What is the annual inventory carrying cost?

Michigan State Figurine Incorporated (MSF) sells crystal figurines to Spartan fans. MSF buys the figurines from a manufacturer for $10 per unit. It sends orders electronically to the manufacturer, costing $20 per order, and it experiences an average lead time of eight days for each order to arrive from the manufacturer. Its inventory carrying cost is 20 percent. The average daily demand for the figurines is two units per day. MSF is open for business 250 days a year. The supplier decides to offer a volume discount. It will sell the crystal figurines at $8 per unit for orders of 250 units or more. Answer the following questions: a. How many units should the firm order each time? Assume there is no uncertainty at all about the demand or the lead time. b. How many orders will it place in a year? c. What is the average inventory? d. What is the annual ordering cost? e. What is the annual inventory carrying cost?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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