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Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer should
- a)Order 200 frames every time
- b)Accept 2% discount
- c)Accept 4% discount
- d)Order Economic Order Quantity
Correct answer is option 'C'. Can you explain this answer?
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Annual demand for window frames is 10000. Each frame costs Rs. 200 and...
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Annual demand for window frames is 10000. Each frame costs Rs. 200 and...
Analysis:
To determine the optimal ordering strategy for the window frames, we need to consider the ordering cost, holding cost, and any available discounts. The total cost can be calculated as the sum of these costs.
Ordering Cost:
The ordering cost is Rs. 300 per order, regardless of the order quantity. This cost is incurred every time an order is placed.
Holding Cost:
The holding cost is Rs. 40 per frame per year. This cost is incurred for each frame in inventory for the duration of one year.
Discounts:
The supplier offers a 2% discount if the order quantity is 1000 or more, and a 4% discount if the order quantity is 2000 or more.
Options:
a) Order 200 frames every time
b) Accept 2% discount
c) Accept 4% discount
d) Order Economic Order Quantity (EOQ)
Calculations:
To determine the optimal ordering strategy, we need to calculate the total cost for each option. Let's consider each option one by one.
a) Order 200 frames every time:
Order quantity = 200 frames
Number of orders required = Annual demand / Order quantity = 10000 / 200 = 50 orders
Total ordering cost = Number of orders * Ordering cost = 50 * 300 = Rs. 15000
Total holding cost = Order quantity * Holding cost = 200 * 40 = Rs. 8000
Total cost = Total ordering cost + Total holding cost = 15000 + 8000 = Rs. 23000
b) Accept 2% discount:
Order quantity = 10000 frames (Annual demand)
Number of orders required = 1 (as the entire demand is covered in a single order)
Total ordering cost = Number of orders * Ordering cost = 1 * 300 = Rs. 300
Total holding cost = Order quantity * Holding cost = 10000 * 40 = Rs. 400000
Total cost = Total ordering cost + Total holding cost = 300 + 400000 = Rs. 400300
c) Accept 4% discount:
Order quantity = 10000 frames (Annual demand)
Number of orders required = 1 (as the entire demand is covered in a single order)
Total ordering cost = Number of orders * Ordering cost = 1 * 300 = Rs. 300
Total holding cost = Order quantity * Holding cost = 10000 * 40 = Rs. 400000
Total cost = Total ordering cost + Total holding cost = 300 + 400000 = Rs. 400300
d) Order Economic Order Quantity (EOQ):
The Economic Order Quantity (EOQ) is calculated using the following formula:
EOQ = sqrt((2 * Annual demand * Ordering cost) / Holding cost)
EOQ = sqrt((2 * 10000 * 300) / 40) = 300
Number of orders required = Annual demand / EOQ = 10000 / 300 = 33.33 (approx.)
Total ordering cost = Number of orders * Ordering cost = 33 * 300 = Rs. 9900
Total holding cost = Order quantity * Holding cost = EOQ * Holding cost =
To determine the optimal ordering strategy for the window frames, we need to consider the ordering cost, holding cost, and any available discounts. The total cost can be calculated as the sum of these costs.
Ordering Cost:
The ordering cost is Rs. 300 per order, regardless of the order quantity. This cost is incurred every time an order is placed.
Holding Cost:
The holding cost is Rs. 40 per frame per year. This cost is incurred for each frame in inventory for the duration of one year.
Discounts:
The supplier offers a 2% discount if the order quantity is 1000 or more, and a 4% discount if the order quantity is 2000 or more.
Options:
a) Order 200 frames every time
b) Accept 2% discount
c) Accept 4% discount
d) Order Economic Order Quantity (EOQ)
Calculations:
To determine the optimal ordering strategy, we need to calculate the total cost for each option. Let's consider each option one by one.
a) Order 200 frames every time:
Order quantity = 200 frames
Number of orders required = Annual demand / Order quantity = 10000 / 200 = 50 orders
Total ordering cost = Number of orders * Ordering cost = 50 * 300 = Rs. 15000
Total holding cost = Order quantity * Holding cost = 200 * 40 = Rs. 8000
Total cost = Total ordering cost + Total holding cost = 15000 + 8000 = Rs. 23000
b) Accept 2% discount:
Order quantity = 10000 frames (Annual demand)
Number of orders required = 1 (as the entire demand is covered in a single order)
Total ordering cost = Number of orders * Ordering cost = 1 * 300 = Rs. 300
Total holding cost = Order quantity * Holding cost = 10000 * 40 = Rs. 400000
Total cost = Total ordering cost + Total holding cost = 300 + 400000 = Rs. 400300
c) Accept 4% discount:
Order quantity = 10000 frames (Annual demand)
Number of orders required = 1 (as the entire demand is covered in a single order)
Total ordering cost = Number of orders * Ordering cost = 1 * 300 = Rs. 300
Total holding cost = Order quantity * Holding cost = 10000 * 40 = Rs. 400000
Total cost = Total ordering cost + Total holding cost = 300 + 400000 = Rs. 400300
d) Order Economic Order Quantity (EOQ):
The Economic Order Quantity (EOQ) is calculated using the following formula:
EOQ = sqrt((2 * Annual demand * Ordering cost) / Holding cost)
EOQ = sqrt((2 * 10000 * 300) / 40) = 300
Number of orders required = Annual demand / EOQ = 10000 / 300 = 33.33 (approx.)
Total ordering cost = Number of orders * Ordering cost = 33 * 300 = Rs. 9900
Total holding cost = Order quantity * Holding cost = EOQ * Holding cost =
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Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer?
Question Description
Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer? for Mechanical Engineering 2024 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer?.
Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer? for Mechanical Engineering 2024 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Annual demand for window frames is 10000. Each frame costs Rs. 200 and ordering cost is Rs. 300 per order. Inventory holding cost is Rs. 40 per frame per year. The supplier is willing to offer 2% discount if the order quantity is 1000 or more, and 4% if order quantity is 2000 or more. If the total cost is to be minimized, the retailer shoulda)Order 200 frames every timeb)Accept 2% discount c)Accept 4% discountd)Order Economic Order QuantityCorrect answer is option 'C'. Can you explain this answer?.
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