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Be sure to check the list of worksheet functions that are needed for the homework assignments, to see which new functions (if any) might help with this assignment.
For a quick way to copy homework problem data into your homework solution, see “Avoid retyping homework problem data.”
Since macros aren’t permitted in this homework assignment, be certain that the workbook you submit for grading has no macros. Read about how to check your workbooks for macros.
Remember that some problems are slight extensions of what we show you in class, in the demonstrations and in the session notes, and some problems are somewhat ambiguous. This is intended to parallel what you’ll frequently encounter at work. If you feel a bit confused, there are some things you can do to help clarify things.
Before attempting this homework, you might find it helpful to read about:
Numbers in square brackets to the right of the problem numbers indicate point values.
The regional warehouse of a fast food chain, Jersey Fried Chicken, orders buckets for its fried chicken every four months. Demand for fried chicken is constant, requiring 140 cases per month. A case of buckets costs $23.00. Assume that inventory is 0 on December 31, and that the first order is received on January 1. Assume also that you receive each new order at exactly the moment that your inventory is depleted.
Find the inventory of chicken buckets, measured in cases, at the beginning of each month of a twelvemonth year. Your result should be a single 1x12 range.
Find the maximum inventory (in cases). Your result should be a single cell.
Find the average inventory (in cases) over one order cycle. Your result should be a single cell.
Find the average annual inventory (in cases). Your result should be a single cell.
Find the average dollar investment required to maintain the inventory. Your result should be a single cell.
The assumptions given in the introduction to Problem 11.1 apply in this problem as well. Jersey Fried Chicken estimates that it spends $91 when it places an order for chicken buckets, and that the cost of maintaining inventory is approximately 25% of its average inventory investment on an annual basis.
Compute the economic order quantity in cases. Your result should be a single cell.
How many orders are required annually (on average), if the quantity ordered each time is the economic order quantity? Your result should be a single cell.
If JFC orders buckets in this way, what are annual ordering costs? Your result should be a single cell.
If JFC orders buckets in this way, what are annual holding costs? Your result should be a single cell.
How much is saved annually compared to the old ordering cycle used in Problem 11.1? Your result should be a single cell.
JFC has negotiated a deal with its paper supplier which gives JFC a quantity discount on its per order purchases of chicken buckets. The price schedule below shows the price per case of buckets as a function of the number of cases ordered:

Assuming that the cost to order is $91 and that the cost to hold is 25% per year, find the optimum order quantity — the order quantity that provides the lowest total costs. Note that the optimum order quantity might be different from the Economic Order Quantity. Your result should be a single cell.
JFC can order at any one of three discount levels. For each discount level, compute the amount by which total costs exceed the total costs JFC sustains if JFC orders according to the strategy you found in (a). Your result should be a single 3x1 range.
Last Modified: Wednesday, 27Apr2016 04:15:26 EDT
Although the assumption of constant demand is critical to justifying the derivation of the formula for Economic Order Quantity, most problems don’t satisfy that requirement in the strict sense. But EOQ is nevertheless a valuable concept in two kinds of circumstances. The first case is when the time scale of the inventory management decisions is much shorter than the time scale of the variations in demand. And the second is when the fluctuations in demand occur much more rapidly than the inventory management decisions.
These two approximations occur repeatedly in modeling problems. Watch for opportunities to apply them elsewhere.