As a result of many process improvements and IT implementations(like EDI), Big Box-Mart has been able to reduce its order costsfrom $38.38 to $7.29 when purchasing cases of paper towels from itsmain paper-products supplier. Annual demand is expected to be163,000 cases and annual holding costs are $9.38 per case.
Hint #1: This is a purchasing order quantity problem (EOQ), not aproduction order quantity problem. For this question we arecombining a JIT concept (lower ordering costs) with what youlearned from a previous chapter (inventory management). Ifnecessary, refer back to that chapter.
Hint #2: Remember to use cell references in all your formulasrather than using a rounded input value from a previouscalculation.
Based on this information, what will be the new optimalorder quantity (using the reduced ordering cost)? (Display youranswer to the nearest whole number.)
When using the reduced ordering cost, as compared to theoriginal ordering cost, by how many cases will the averageinventory go down? (Display your answer to the nearest wholenumber.)
What will be the annual total combined savings toordering costs and holding costs when using the reduced order cost,as compared to the original ordering cost? (Display your answer totwo decimal places.)
Please show your work so I may learn.
