HW4 - 20-17(20 min.)Economic order quantity, effect of...

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Unformatted text preview: 20-17(20 min.)Economic order quantity, effect of parameter changes (continuation of 20-16).1. D = 10,000, P = $20, C = $101020$000,102CDP2EOQ=== 200 jerseysThe sizable reduction in ordering cost (from $225 to $20 per purchase order) has reduced the EOQ from 671 to 200.2.The AP proposal has both upsides and downsides. The upside is potentially higher sales. SW customers may purchase more online than if they have to physically visit a store. SW would also have lower administrative costs and lower inventory holding costs with the proposal.The downside is that AP could capture SWs customers. Repeat customers to the AP web site need not be classified as SW customers. SW would have to establish enforceable rules to make sure it captures ongoing revenues from customers it directs to the AP web site.There is insufficient information to determine whether SW should accept APs proposal. Much depends on whether SW views AP as a credible, honest partner....
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This note was uploaded on 12/04/2011 for the course ACC 3110 taught by Professor Zhanelmailibayeva during the Fall '11 term at Kazakhstan Institute of Management, Economics and Strategic Research.

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HW4 - 20-17(20 min.)Economic order quantity, effect of...

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