Buckshot Electronics is a chain of electronics superstores t

Buckshot Electronics is a chain of electronics superstores that is located throughout California. They have 15 locations concentrated primarily in heavily populated areas. They sell thousands of products made by hundreds of different manufacturers. Buckshot sells everything from phones, cameras, DVD players, and video game consoles to large items like televisions. Sony is one of their larger suppliers. They offer products in nearly every category Buckshot offers to its customers. In fact, Sony sells multiple cell phone models through Buckshot. One such model is the Q9900. One of Buckshot\'s San Francisco stores is forecasted to sell about 7800 units of the Q9900 in the coming year. This forecasted demand is about average in terms of Buckshot\'s 15 other California locations. Presently they order 900 units of the Q9900 every 6 weeks. Each store fills weekly orders through its Sony Distributor for items like TV\'s, DVD Players, cameras, and of course, cell phones, in addition to many other items. Orders for cell phones must be made in increments of 100 units. The distributor takes only one order per week, but Buckshot is not obligated to order every item every week. That order is then shipped 2 days later to that individual Buckshot Electronics location by truck. Buckshot\'s Central Procurement is looking to save money by investigating order sizes and subsequent order frequency. You are being asked to create a recommendation for order size and time between orders for the Q9900 based on the numbers for this San Francisco location. Answer the questions that follow in order to create a detailed report

Below are some the key figures important in your analysis:

Q9900 Wholesale Price $ 325.00 Q9900
Retail Price $ 399.00

Annual Per Unit Holding Costs are estimated at 35% of the wholesale cost of the Q9900.

Costs associated with each order include:

Order Placement Fees (Documentation, Network Support) $ 250.00

Delivery (Fuel, Driver, Truck, etc.) $ 350.00

Packaging $ 150.00 Receiving

(Inspection, Documentation, etc.) $ 150.0

Labor ( 5 hours @ $10.00/hr)Stocking, Misc. $ 50.00

Solution

Answer:

1. What is the annual demand for one store? Find D: (Choose the closest answer)

Answer: The annual demand = 7800 units

2. What is the per unit annual holding for one store? Find h: (Choose the closest answer)

Answer: Holding cost = 35% x $325 per unit = 113.75

3. What is the per unit cost for each item?

Answer: $399 per unit

4. What is the cost to place one order? In other words, every time the company places an order, which costs are incurred? Find S: (Choose the closest answer)

Answer: Ordering cost per order = $950

5. What is the weekly demand? Find D/52: (Choose the closest answer)

Answer: Weekly demand = D / 52 = 150 units.

6. How many orders per year are being placed annually?

Answer:

EOQ = square root [(2 x 7800 x 950)/113.75] = 360.95 units.