Dresses-R-us sells a line of upscale evening dresses in aboutique. The store charges $200 per dress and sales average 20units per week. Currently, they order 10-week supplies from themanufacturer and pay $100 per dress. Lead-time is 2 weeks. Thestore estimates the administrative cost of placing each order to be$200. Adding the cost of capital and related costs the storemanager believes that each dollar’s worth of idle inventory cost$0.30 per year. a. Compute the total annual cost of ordering andcarrying inventory. b. If they wish to minimize annual cost, whenand how much should the store order in each batch? (assume that thestore will order enough units to cover demand for some number ofweeks – n, so the question is to find the optimal value of theinteger n) c. Find the number of inventory turns per year given theold and the new policy. The supplier offers Dresses-R-us a volume based discount. Thesupplier will drop the price to $95 per dress, but for only ordersizes above 250. The store is also considering an alternatesupplier that has an electronic ordering system. Because of thenature of the software, ordering from this supplier drops theadministrative cost to $100 per order and the store can select anyorder size up to 200 units per order. Which deal should the storeaccept? (Assume they must accept one of these deals.)
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