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A.The Uptown Kiln is an importer of ceramics from overseas. It has
arranged to purchase a particular type of ceramic pottery from a
Korean artisan. The artisan makes the pottery in 120-unit batches and
will ship only that exact amount. The transportation and handling cost
of a shipment is $7,600 (not including the unit cost). The uptown Kiln
estimates its annual demand to be 900 units. What storage and
handling cost per unit does it need to achieve in order to minimize its
inventory cost?
B.The I-75 Carpet Discount Store has an annual demand of 10,000 yards
of Super Shag carpet. The annual carrying cost for a yard of this
carpet is $0.75, and the ordering cost is $150. The carpet manufacturer normally charges the store $8 per yard for the carpet; however,the manufacturer has offered
a discount price of $6.50 per yard if the store will order 5,000 yards. How much should the store order, and what will be the total annual inventory cost for
that order quantity?
C. The bookstore at State University purchases sweatshirts emblazoned
with the school name and logo form a vendor. The vendor sells the
sweatshirts to the store for $38.00 apiece. The cost to the bookstore
for placing an order is $120.00, and the carrying cost is 25% of the price paid per shirt
The bookstore manager estimates that 1,700 sweatshirts will be sold
during the year. The vendor has offered the bookstore the following volume
discount schedule.
Order Size                                              Discount %
1-299                                     0
300-499                                 3
500-799                                 5
800 +                                     6
The bookstore manager wants to determine the bookstores’ optimal order
quantity given the foregoing quantity discount information.

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