Practice Problem
MBA 676 Final Practice Problems
Comments: Some of these problems were done as homework and some I solved in class. I would like you to review them. I will give you similar problems. I may also assign you some problems from Project scheduling after we cover it tomorrow.
1. Keith Shoe Stores carries a basic black dress shoe for men that sells at an approximate constant rate of 500 pairs of shoes every 3 months. Keith’s current buying policy is to order 500 pairs each time an order is placed. It costs Keith $30 to place an order. The annual holding cost rate is 20%. With an order quantity of 500, Keith obtains the shoes at the lowest possible unit cost of $28 per pair. Other quantity discounts offered by the manufacturer are as follows. What is the minimum-cost order quantity for the shoes? What are the annual savings of your inventory policy over the policy currently being used by Keith?
|Order Quantity |Price Per Pair |
|0-99 |$36 |
|100-199 |$32 |
|200-299 |$30 |
|300 or more |$28 |
2. The B & S Novelty and Craft Shop in Bennington, Vermont, sells a variety of quality handmade items to tourists. B & S will sell 300 hand-carved miniature replicas of a Colonial soldier each year, but the demand pattern during the year is uncertain. The replicas sell for $20 each, and B&S uses a 15% annual holding cost rate. Ordering costs are $5 per order, and demand during the lead time follows a normal
Comments: Some of these problems were done as homework and some I solved in class. I would like you to review them. I will give you similar problems. I may also assign you some problems from Project scheduling after we cover it tomorrow.
1. Keith Shoe Stores carries a basic black dress shoe for men that sells at an approximate constant rate of 500 pairs of shoes every 3 months. Keith’s current buying policy is to order 500 pairs each time an order is placed. It costs Keith $30 to place an order. The annual holding cost rate is 20%. With an order quantity of 500, Keith obtains the shoes at the lowest possible unit cost of $28 per pair. Other quantity discounts offered by the manufacturer are as follows. What is the minimum-cost order quantity for the shoes? What are the annual savings of your inventory policy over the policy currently being used by Keith?
|Order Quantity |Price Per Pair |
|0-99 |$36 |
|100-199 |$32 |
|200-299 |$30 |
|300 or more |$28 |
2. The B & S Novelty and Craft Shop in Bennington, Vermont, sells a variety of quality handmade items to tourists. B & S will sell 300 hand-carved miniature replicas of a Colonial soldier each year, but the demand pattern during the year is uncertain. The replicas sell for $20 each, and B&S uses a 15% annual holding cost rate. Ordering costs are $5 per order, and demand during the lead time follows a normal