Discuss the below:
Q: After Jane graduated from Singapore Management University, she began her career as inventory manager for one local beer distributor call ABCWerks in Singapore. In OM class, she acquired the knowledge of economic order quantity formula to compute the optimal order sizes. Currently, she is placing orders from ABCWerks's supplier, Asia Pacific Brewery. Each order placed with AP Brewery costs $10 that includes labor, forms postage, and so forth.
a. Jane finds that her company sells on average 100 cases a week of regular 12-oz Tiger beer where demand is constant over a 50-week year. For every two weeks, she places an order with APB at a cost of $8 per case. The inventory-related holding cost (capital, insurance, etc) for her company equals 25% of the dollar value of inventory per year. If Jane applies EOQ formula, what is the order quantity that minimizes her company's total inventory-related costs i.e., holding and ordering? What is her company's inventory turns per year? What is the inventory-related cost per case of beer sold?
b. Assume that AP Brewery is willing to give a 5% quantity discount if the distributor orders 600 cases or more at a time. If the company is interested in minimizing its total cost (i.e., purchase and inventory-related costs), should Jane begin ordering 600 or more cases at a time?