Chapter 14
ST142 a. Data:
S 60,000 gallons
O $200 per order
C $1 per gallon per year
Calculation:
23S3O
EOQ 5
C
2 3 60,000 3 $200
5
$1
5 "24,000,000
5 4,899 gallons
b. Data:
Lead time 20 days
Daily usage 60,000 gallons/365 days
164.38 gallons/day
Calculation:
Reorder point lead time in days daily usage
20 days 164.38 gallons/day
3,287.6 gallons
ST143 Tabular Calculation of the Effects of Relaxing Credit Standards on Regency Rug
Repair Company:
-GITM.appB.B1-30.CTP 12/7/04 7:25 PM Page B-26
B-25 APPENDIX B
Chapter 15
ST151 a.
Approximate cost of
Supplier giving up cash discount
b. Supplier Recommendation
c. Stretching accounts payable for supplier Z would change the cost of giving
up the cash discount to
2% [365/[(60 20) 20]) 2% 365/60 2% 6.1 12.2%
In this case, in light of the 15% interest cost from the bank, the recommended
strategy in part b would be to give up the discount, because the 12.2% cost of
giving up the discount would be less than the 15% interest cost from the bank.