Assignment:
Ontario Jewelers (O) purchases uncut diamonds for use in the manufacture of their jewelry design that are sold in their retail stores throughout the province. Diamonds are purchased from a broker at an average cost of $750 per unit. OJ expects to purchase 780 units diamonds in 2016 and their cost of placing an order is $500 Insurance costs and the risk of devaluation result in the holding cost being 20% of the cost of the diamond. OJ operates six days per week, 50 weeks per year.
a. What is the annual handling cost if they were to purchase 25 diamonds at a time?
b. Calculate the ideal number of diamonds that should be purchased with each order.
c. Compared to purchasing 25 diamonds each time, how much money would OJ save annually by purchasing the ideal number of diamonds each time?
d. Due to an economic upturn, business for OJ has been very good. At the end of 2016 they realize that they actually purchased and used 1500 diamonds, well above their original forecast. How much did the inaccurate forecast cost OJ?
e. Urban Promotions (UP) is a company that sells custom promotional items to organization. One of their most popular items is logoed golf shirts which they purchase from a Canadian manufacturer. UP then takes their clients artwork or logo and embroiders the shirts to meet the requirements of their customers. Due to increasing competition in the promotional item industry driving down prices, UP is looking for ways to reduce their costs. Currently, they pay their supplier S15 per shirt. Shirts must be purchased by the case of 40 bringing the case cost to $600. Their annual demand is forecast to be 12,000 shirts, it costs UP$50 to place and receive an order and the holding cost is 5% of its product purchase cost. UP's supplier has agreed to offer them discounts if they place larger orders as per the table below.
How many cases of golf shirts should UP purchase with each order? Show all of your calculations.