2) Suppose Stanley's Office Supply purchases 70,000 boxes of pens every year. Ordering costs are $133.95...

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2) Suppose Stanley's Office Supply purchases 70,000 boxes ofpens every year. Ordering costs are $133.95 per order and carryingcosts are $0.75 per box. Moreover, management has determined thatthe EOQ is 5,000.40 boxes. Note: The ordering costs and EOQ differfrom problem 1. The vendor now offers a quantity discount of $0.03per box if the company buys pens in order sizes of 10,000 boxes.Determine the before-tax benefit or loss of accepting the quantitydiscount. (Assume the carrying cost remains at $0.75 per boxwhether or not the discount is taken.) Enter your answer rounded totwo decimal places. Do not enter $ or comma in the answer box. Forexample, if your answer is $12,300.456 then enter as 12300.46 inthe answer box.
3) Use the data from problem 2 and a 365 day year. If the leadtime for placing an order is 14 days, and Stanley's Office Supplyholds a Safety Stock of 45 days Supply of Boxes of Pens, then atwhat inventory level in Boxes should an order be placed? Enter youranswer rounded to two decimal places. For example, if your answeris 123.45% or 1.2345 then enter as 1.23 in the answer box.

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4.1 Ratings (458 Votes)

2).

	Formula	EOQ	Proposed
Quantity required	Q	70,000	70,000
Order size (in units)	O	5,000.40	10,000
Ordering cost per order	OC	133.95	133.95
Carrying cost per unit	CC	0.75	0.75
Discount offered per unit	D	-	0.03
Purchase price per unit		70.71	70.68
Number of orders	N = Q/O	14.00	7.00
Calculations:
Ordering cost	OC1 = N*OC	1,875.15	937.65
Carrying cost	CC1 = (CC*O)/2	1,875.15	3,750.00
Total cost	C = OC1 + CC1	3,750.30	4,687.65
Extra cost	C_proposed - C_EOQ		937.35
Discount	D*Q		2,100.00

Before-tax benefit of accepting the discount = Discount - Extra cost = 2,100 - 937.35 = 1,162.65

3).

Daily demand	DD = Q/365	191.78
Lead time (in days)	L	14
Safety stock (in days)	Sn	45.00
Safety stock (in units)	Su = (Sn*DD)	8,630.14
Reorder point	R = (DD*L) + Su	11,315.07
Order size (in units)	O	5,000.40
Inventory level	R/O	2.26

Inventory level when an order should be placed = 2.26

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Transcribed Image Text

2) Suppose Stanley's Office Supply purchases 70,000 boxes ofpens every year. Ordering costs are $133.95 per order and carryingcosts are $0.75 per box. Moreover, management has determined thatthe EOQ is 5,000.40 boxes. Note: The ordering costs and EOQ differfrom problem 1. The vendor now offers a quantity discount of $0.03per box if the company buys pens in order sizes of 10,000 boxes.Determine the before-tax benefit or loss of accepting the quantitydiscount. (Assume the carrying cost remains at $0.75 per boxwhether or not the discount is taken.) Enter your answer rounded totwo decimal places. Do not enter $ or comma in the answer box. Forexample, if your answer is $12,300.456 then enter as 12300.46 inthe answer box.3) Use the data from problem 2 and a 365 day year. If the leadtime for placing an order is 14 days, and Stanley's Office Supplyholds a Safety Stock of 45 days Supply of Boxes of Pens, then atwhat inventory level in Boxes should an order be placed? Enter youranswer rounded to two decimal places. For example, if your answeris 123.45% or 1.2345 then enter as 1.23 in the answer box.