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problem: A beer distributor determines that it sells on average 100 cases a week of regular 12-oz. Budweiser. For this problem suppose that demand occurs at a constant rate over a fifty (50) week year. The distributor currently buys beer every two weeks at a cost of dollar 8 per case. The inventory-related holding cost [capital, insurance, etc.] for the distributor equals 25% of the dollar value of inventory per year. Each order placed with the supplier costs the distributor $10. This cost includes labor, forms, postage, and so forth.

[A] Suppose the distributor can choose any order quantity it wishes. Find what order quantity minimizes the distributor's total inventory-related costs?

[B] Determine the average flow time from the cycle inventory?

[C] Determine the inventory related cost per case of beer sold?

[D] Assume that the brewer is willing to give a 5% quantity discount if the distributor orders 600 cases or more at a time. If the distributor is involved in minimizing its total costs [purchase & inventory-related costs], should the distributor begin ordering 600 or more cases at a time? describe your reasoning.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M920784

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