Business, 17.03.2020 04:33 alondrahernande3

Best Buy Part B) At a Best Buy store, the forecast for the annual demand of a Motorola cell phone is 15600. Demand forecasts are updated weekly and the unit time is one week. Motorola takes 2 weeks to supply an order and the setup cost is $400 per order. The holding cost rate is 10% and one cell phone costs $50. The store manager now finds that the weekly demand is highly random and normally distributed with a mean of 300 and a standard deviation of 200. Best Buy is targeting a service level of 97.73%. (Best Buy Part B) (a) What is the cycle inventory (or half of order quantity)? [Answer format: integer] (b) What is the average inventory (or inventory held on average between orders)? [Answer format: integer] Write your answer(s) as 123, 4567

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Answer from: maddielr17

Calculation of economic order quantity (EOQ):

The formula to calculate economic order quantity is,

EOQ = $\sqrt{\frac{2DC_{S} }{C_{H} } }$

Where,

D is the annual demand

Cs is the setup cost

CH is the holding cost

Substitute $15,600 for D, $400 for Cs and $5 for CH in the above formula.

EOQ = $\sqrt{\frac{2 * 15600 * 400}{5} }$

EOQ = $1580

Hence, the economic order quantity is 1,580.

(a). Calculation of total setup cost:

The formula to calculate total setup cost is,

Total setup cost = (D/EOQ) x $C_{S}$

Substitute 15600 for D, $400 for $C_{S}$ and 1580 for EOQ in the above formula

Total setup cost = (15600/1580) x $400

Total setup cost = $3,949.36

Hence, the total setup cost is $3,949.36

(b). Calculation of total holding cost:

The formula to calculate total holding cost is,

Total holding cost = (D/2) x $C_{H}$

Substitute 15600 for D and $5 for $C_{H}$ in the above formula

Total holding cost = (15,600/2) x 5

Total holding cost = $3,900

Hence, total holding cost is $3,900

(c). Calculation of total cost:

The formula to calculate total cost is,

Total cost = D x C + $C_{TS}$ + $C_{TH}$

Where,

D is the annual demand

C is the cost

$C_{TS}$ is the total setup cost

$C_{TH}$ is the total holding cost

Substitute 15600 for D, $50 for C, 3949.37 for $C_{TS}$ and $3,950 for $C_{TH}$ the above formula,

Total cost = (15,600 x $50) + $3,949.37 + $3,950

Total cost = $787,899.37

Hence, total cost of order is $787,899.37

Answer from: Quest

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Answer from: Quest

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Best Buy Part B) At a Best Buy store, the forecast for the annual demand of a Motorola cell phone is...

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