BZoom sells toy bricks that can be used to construct a wide range of machines, animals, buildings, etc. They purchase a red dye powder to include in the resin they use to make the bricks. The power is purchased from a supplier for $1.3 per kg. At one production facility, BZoom requires 400 kgs of this red dye power each week. BZoom’s annual holding costs are 30% and the fixed cost associated with each order to the supplier is $50.
a. How many kgs should BZoom order from its supplier with each order to minimize the sum of ordering and holding costs? kgs
b. If BZoom orders 4,000 kgs at a time, what would be the sum of annual ordering and holding costs?
(Round your answer to 3 decimal places.)
c. If BZoom orders 2,000 kgs at a time, what would be the sum of ordering and holding costs per kg of dye? per kg
(Round your answer to 2 decimal places.)
d. If BZoom orders the quantity from part (a) that minimizes the sum of the ordering and holding costs. What is the annual cost of the EOQ expressed as a percentage of the annual purchase cost? percent
e. BZoom’s purchasing manager negotiated with their supplier to get a 2.5% discount on orders of 10,000 kgs or greater. What would be the change in BZoom’s annual total cost (purchasing, ordering and holding) if they took advantage of this deal instead of ordering smaller quantities at the full price?
It would decrease by more than $1,000
It would decrease by less than $1,000
It would increase by less than $1,000
It would increase by more than $1,000