A bakery buys sugar from a big distributor to use in baking cakes. Typically, they use 3679 bags of sugar in a year. The price of sugar is typically $13 per bag. The cost to the bakery for placing an order is $28, and the annual carrying cost is $15 per bag. The distributor has offered the bakery the following volume discount schedule:
Order Size……….Discount rate on the original price
—————————————————-
1–449 ……………..0%
450–799…………..5%
800++………………10%
We are trying to find how many bags of sugar should the store order, whenever they place a new order of sugar.
Assume 364 days a year and 52 weeks a year.
IMPORTANT: Note, the discounts off of original price are reported. You need to calculate the actual prices.
If we ignore the discounts, how many bags of sugar should we order?
Your answer
How much is the total annual inventory related and purchasing costs (holding, ordering, and purchasing costs), if the bakery order the quantity from EOQ model?
Your answer
How much is the total annual inventory related and purchasing costs (holding, ordering, and purchasing costs), if the bakery orders just enough to get 5 percent discount?
Your answer
How much is the total annual inventory related and purchasing costs (holding, ordering, and purchasing costs), if the bakery orders just enough to get 10 percent discount?
Your answer
Based on this quantity discount information, how may bags of sugar should the store order?
Your answer
How often (in “days”) should the bakery order?
