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ASSESSMENT COVER SHEET

Kelvinsun Jovias
Student’s name
29438403
ID number Phone 0434422077
Business modelling
Unit name Unit code ETF2480
Monash email Jkel0010@student.monash.edu

Title of assignment Assignment 2

Lecturer Jill Wright Tutor Annista Wijayanayake
Has any part of this assignment been previously submitted as part of another unit/course? Yes
No
Tut/Lab day Thursday Tut/Lab time 6.00 pm

Due date 18/10/2019 Date submitted 18/10/2019

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lecturer/tutor.
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Assignment 2

A)
i)

With the assumptions that TARC is at its lowest, means that annual holding cost would be equal to the
annual ordering cost. From there we can find the Ch then rate of I which is, the holding cost rate I= 0.096
≈ 9.6%≈ 10%
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(solver for Ch) (Solver for I)

ii) the total cost of holding one box per year is Ch= 0.96 cents

iii) the TARC is $960

B) reorder point is should be 100 boxes since the total order is 6000 box per year, and they are open 300
6000
days a year, with it taking 5 days between placing and receiving an order. ×5=100 box
300

C) holding cost rate I is now 13%, which means that $10× 0.13=$ 1.3 and the warehouse manager stated
that it cost $100 to store 500 box, which means 100/500= 0.2 cents for 1 box per year. Which means each
year holding cost per box is 1.3+0.2= $1.5

D)
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Considering the new holding costs, the purchasing arrangement for a minimum TARC is changed as well.
The optimal quantity ordered Q is now 800 boxes. The number of orders per year is now 7.5≈ 8 times a
year, which is 2 more than the original amount of orders. The annual holding cost and ordering cost are
now $600. And the minimum TARC is now $1200

E)
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i) Using the arrangement from part (a) while using the correct rate of I, the minimum TARC now
increases. The first part states that 1000 boxes are ordered every 50 working days, this results in the
annual holding cost to increase from $480 to $750 when compared to the original part (a) values. Thus the
correct TARC using the original purchase arrangement is supposed to be $1230 compared to the original
value of $960.
ii) yes, we should be concerned by the suitability of the estimates as the holding rate was wrong, resulting
a difference of TARC being quite high from the original estimates of part (a). however, it is to be
reminded that the correct TARC from part (d)=$1200 is not that different from $1230

F)
i)

The table before using solver

ii)
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After solver

(solver for 0% discount) (solver for 5% discount)

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(solver for 10% discount)

iii) from the results of solver we can see that ordering 3000 boxes for the 10% is the best option as it
minimises the TARC the most resulting in $56 215. For the 5% discount, ordering the minimum amount
of 1500 boxes results the minimum amount of TARC of $58 396. While ordering 800 boxes gives the
minimum TARC without any discounts at $61 200. As stated before ordering 3000 boxes to gain 10%
discount is the best option.