Demand forDeskproComputer at Best Buy is 1000 units per month. Best Buy incurs fixed order placement, transportation and receiving cost of $4000each time order is placed. Each computer costs Best $500. The retailer has a holding cost of 20%.

QUESTION 1

1.  Find the optimal number of computers in each replenishment lot (Q*)?

12 points

QUESTION 2

1.  What is the total cost to BestBuy?

11 points

QUESTION 3

1.  What is the average flow time - in months (2 decimal places)?

11 points

QUESTION 4

1.  As part of its initiative to implement just-in-time (JIT) manufacturingBestBuyhas reduced the number of computers in each order to 200 units, what should the corresponding optimal order cost be?

11 points

QUESTION 5

1.  What is the revised Total Cost if the optimal order size is scaled to a more convenient size of 1100?

11 points

QUESTION 6

1.  ShouldBestBuygo with the more convenient lot size of 1100?

Yes
No

11 points

QUESTION 7

1.  Why do you think the convenient lot size is better in this case?

/ Because the increase in the total cost by ordering in a convenient lot size is marginal.
/ Because it doesn't costBestBuythat much.
/ Because the Total Cost goes down.
/ None of the above.

11 points

QUESTION 8

1.  If the monthly demand increases to 4000 units per month, what is the change in new Q*?

11 points

QUESTION 9

1.  Select the correct relationship whichdescribes how demand increases impacts optimal order size:

/ ) if demand is increased by a factor of sqrt(k) then the Q* is increased by a factor of k;
/ if demand is increased by a factor of k then the Q* is increased by a factor of k^2
/ if demand is increased by a factor of kthen the Q* is increased by a factor of sqrt(k);
/ no relationship

11 points