HOME WORK-04

SARANPRASANTH THIRUVAZHUTHIMUTHUKUMAR
K00420899

(13). W.W. GRAINGER

Given that
Demand for fastener=20000/month
Annual demand, (D)=12*20000=240000boxes/year
Holding cost, (H), =20%=20/100=0.2
Fixed cost, (S)=$400
Pricing scheme for orders below 30000, (Co)=$5
Pricing scheme for orders above 30000, (C1) =$4.90
Economic order quantity for orders below
30000=sqrt((2*D*S)/(H*Co))
=sqrt ((2*240000*400)/ (0.2*5))

=13856.401=13856 boxes
Economic order quantity for orders above
30000=sqrt((2*D*S)/(H*C1))
= sqrt ((2*240000*400)/ (0.2*4.9))
=13997.084=13997 boxes
Therefore, number of boxes ordered per replenishment =13856
and 13997 boxes

(16) AMAZON
Given that
Demand=5000/month
Annual demand, D=5000*12=60000/year
Holding cost, H=25%=25/100=0.25
Ordering cost, S= $500/order
Let us consider, qo=0; q1=10000; q2=20000
Co=$200; C1=$195; C2=$190
Vo=0; V1= Co* (qo- q1) =200*(10,000-0) =$2000000;
V2= Co* (qo- q1) + C1* (q2-q1) =3950000
Economic order quantity for qo, Qo=sqrt ((2*D*(S+ Vo-
qo*Co))/(H*Co)) =sqrt ((2*60000(500+0-0*200))/ (0.25*200))
=1095
Economic order quantity for q1, Q1=sqrt ((2*D*(S+ V1-
q1*C1))/(H*C1)) =sqrt ((2*60000(500+2000000-10000*195))/
(0.25*195)) =11149
Economic order quantity for q2, Q2=sqrt ((2*D*(S+ V2-
q2*C2))/(H*C2)) =sqrt ((2*60000(500+3950000-10000*190))/
(0.25*190)) =71974
Total cost= order cost+ holding cost+ purchase cost
Total cost of qo=D/Qo*(S)+[Vo+(Qo-qo)
Co]H/2+D/Qo[Vo+(Qo-qo) Co]
= (60000/1095) *(500) + [0+(1095-0)
*200]0.25/2+60000/1095[1095*200]
=$12054772
Total cost of q1=D/Q1*(S)+[V1+(Q1-q1)
C1]H/2+D/Q1[V1+(Q1-q1) C1]
= (60000/11149) *(500) + [2000000+(11149-
10000) *195]0.25/2+60000/11149[200000+(11149-10000)
*195] =$14974362
Total cost of q2=D/Q2*(S)+[V2+(Q2-q2)
C2]H/2+D/Q2[V2+(Q2-q2) C2]
= (60000/71974) *(500) + [3950000+(71974-
20000) *190]0.25/2+60000/71974[3950000+(71974-20000)
*190] = $ 11525045
From the above we can conclude that the lowest cost is for the
order quantity of 71974 as it offers lowest total cost and highest
quantity discount to manufacturers.
(24) ORANGE
(a) given that
Demand, D= 2000000-2000p
Production cost. Cr = $100/orange
Here to get maximum profit differentiating the profit equation
with respect to p and setting it equals to zero
Profit, Po= (2000000-2000p) p-(2000000-2000p) Cr
DPo/dp=d ((2000000-2000p) p-(2000000-2000p) Cr)/dp=0
p= (2000000+2000*(100))/4000=$550
therefore, wholesale price for J-pod= $550
price set by good buy= (2000000+2000*(550))/4000 = $775
here demand depends on final retail price,
profit of oranges at equilibrium= (2000000-2000*775) *(550-
100)
=$202500000
Profit for good buy at equilibrium= (2000000-2000*775) *(775-
550)
=$ 101250000
(b) discount offered = $40
Now C=550-40=510
Then profit, p= (2000000+2000*(510))/(4000)=$755
Therefore, Good buy needs to give $20 discounts to maximize
its own profit.