Question

The newly formed association of Chartered Institute of Transport and Logistics students at CBU purchases t-shirts emblazoned with the university name and logo from a vendor in Lusaka. The vendor sells the t-shirts to the association for K40 apiece. Shipping from Lusaka to Kitwe costs K85 per order. When an order arrives, it has been estimated that receiving and inspection tasks cost the Association K15. The annual holding cost for a t-shirt is calculated as 20% of the purchase cost. The association president estimates that 4000 t-shirts will be sold during the upcoming academic year.
1. a) Determine the optimal order quantity using the basic EOQ model.

b) The vendor has recently offered a 5% discount on the purchase price if the association orders 500 or more but less than 2000 at a time, and a 8% discount if the association orders 2000 or more at a time. Would you take up one of these offers? If so, what is the new optimal order quantity, and if not, why not?

c) Based on your answer in part b), how many orders will there be in a year? What is the annual average inventory level?
d) Based on your answer in part b), what is the reorder point if the lead time is 4 business days? Assume that there are 290 business days a year.
e) In parts a) and b), explain some assumptions used in calculating the optimal order quantity.

Answer 1

Answer:

Pls don't write too much ok

Answer 2

Answer:

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