Optimal Order Quantities
In your studies this week, you found that the optimal order quantity is achieved at the point at which inventory setup cost per unit of time equals inventory holding cost per unit of time. Knowing this, your employer, a manufacturer of office chairs, asks that you determine the optimal order quantity for two suppliers of coil springs.
Your manufacturing facility operates 50 weeks a year and requires a steady supply of 1000 coil springs per week. Supplier A charges $1 for each spring, and you resell them for $4 each. The set up charge is $20 per order. An inventory carrying charge of 25% is incurred.
Complete the table and calculate the optimal order quantity for Supplier A.
Units
Setup costs
Inventory carrying cost
Show equation used with all above values filled in
Optimal order quantity of springs
Provide a similar table and calculate the optimal order quantity of springs for Supplier B. Supplier B charges $2 for each spring. The set up charge is $10 per order. All other variables remain the same as with Supplier A.
The calculations assume that you are starting with a zero inventory balance. Discuss why zero inventory balance is or is not a desirable condition in most businesses. Be sure to include at least the three benefits of lower inventory carrying costs, having an inventory safety stock, and other potential benefits or risks.
The Optimal Order Quantities paper:
Must be two to three double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center (Links to an external site.)Links to an external site..
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted
Must use at least two scholarly sources in addition to the course text.
The Scholarly, Peer Reviewed, and Other Credible Sources (Links to an external site.)Links to an external site. table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
Must document all sources in APA style as outlined in the Ashford Writing Center.
Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.
Carefully review the Grading Rubric (Links to an external site.)Links to an external site. for the criteria that will be used to evaluate your assignment.
