*Please show Calculations and record answers You have a contract…

*Please show Calculations and record answers
You have a contract to make a small wooden souvenir for sale at the Gift Shop of the local Visitor’s Center. The items are small/lightweight so primary cost of shipping is the fixed cost of a trip across town.
Other relevant data for the Gift Shop are:
– Quarterly Demand (units) =2500
– Ordering (shipping) cost per order (gas for round trip drive in your pickup) =10
– Holding cost per unit per month (simply cost of storing in your basement) =0.05
Scenario A: Gift Shop doesn’t care when deliveries occur
Q1: What inventory model would you use to decide how many wooden souvenirs to deliver to the Gift Ship on each trip? Justify your answer.
Q2: What is your Optimum Delivery Strategy and Annual Cost?
Delivery Strategy:
Optimum Quantity:
Holding Cost:
Ordering Cost:
Total Cost:
Q3: What are some of the drawbacks of the model you are for this application, and how would you qualitatively adjust this quantity in practice?
Scenario B: Gift Shop requires vendors to make deliveries once a month
Q4: How does this impact your cost, and would you accept these delivery terms?
Optimum Quantity:
Holding Cost:
Ordering Cost:
Total Cost:
Accept terms/Why:
Scenario C: Gift Shop requires vendors to make deliveries Just-in-Time (JIT), i.e. once a week
Q5: How does this impact your cost, and would you accept these delivery terms?
Optimum Quantity:
Holding Cost:
Ordering Cost:
Total Cost:
Accept terms/Why:
Pros/Cons of JIT?

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