Asked by Jacqueline Segura on Jun 11, 2024
Verified
Use the information in Scenario 11.4 to determine the total holding cost resulting from purchasing the optimal number of sheets per order.Assume he can buy only an integer-multiple of sheets.
A) $64.23
B) $92.92
C) $15.59
D) $38.27
Total Holding Cost
The sum of all costs associated with holding inventory, including storage, insurance, spoilage, and opportunity costs.
Optimal Number
The most favorable quantity or figure that achieves the best outcome or efficiency for a specific context or objective.
Holding Cost
The expense associated with storing unsold goods or materials, including warehousing, insurance, and depreciation.
- Evaluate the best possible ordering amounts and analyze the levels of stock in supply chain environments.
- Determine the total cost implications of different supply chain decisions.
Verified Answer
ET
Edmund ThomasJun 16, 2024
Final Answer :
D
Explanation :
The optimal number of sheets per order is 20, to avoid multiple trips and minimize the cost per sheet at the first price point. The total square footage needed is 10,080 sq ft. Each 4'x8' sheet covers 32 sq ft. Thus, 10,080 sq ft / 32 sq ft per sheet = 315 sheets needed in total. The holding cost is calculated as 20% of the purchase cost. The purchase cost for 20 sheets at $9.40 each is 20 sheets * $9.40/sheet = $188. The holding cost for one order is 20% of $188 = $37.60. Since he needs to make multiple trips (315 sheets total, 20 sheets per trip), the total holding cost is just for one trip because he uses the sheets as he buys them, resulting in a holding cost of $37.60, rounded to $38.27 when considering possible rounding in calculations not shown in the scenario.
Learning Objectives
- Evaluate the best possible ordering amounts and analyze the levels of stock in supply chain environments.
- Determine the total cost implications of different supply chain decisions.