Sarah’s
Organic Soap Company makes organic liquid soap. One of the raw
materials for her soaps is...
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Sarah’sOrganic Soap Company makes organic liquid soap. One of the rawmaterials for her soaps is organic palm oil. She needs 700 kgs ofpalm oil per day on average. The supplier charges a $70 deliveryfee per order (which is independent of the order size) and $5.75per kg. Sarah’s annual holding cost is 20%. Assume she operates andsells 5 days per week, 52 weeks per year.
a.
If Sarah wants to minimize herannual ordering and inventory holding costs, how much palm oilshould she purchase with each order (in kgs)?
kgs
(Round tonearest integer.)
b.
If Sarahorders 3500 kgs with each order, what would be the annual sum ofordering and holding costs?
(Roundyour answer to 3 decimal places.)
c.
If Sarahorders 8000 kgs with each order, what would be sum of ordering andholding costs per kg sold?
perkg
d.
Sarah’s supplier is willing to sell herpalm oil at a 5% discount if she purchases 15,000 kgs at a time. Ifshe were to purchase 15,000 kgs per order what would be her annualsum of ordering and holding costs?
Answer & Explanation
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3.7 Ratings (363 Votes)
Daily demand 700 kgs Number of days in a year 52 weeks x 5 days 260 days Annual demand DDaily demand x number of days in a year 700 x 260 182000 kgs Ordering
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