Hello, I need help with this exercises. Thanks.
11. Crunchy, a cereal manufacturer, has

dedicated a plant for one major retail chain. Sales at the retail chain average about

20,000 boxes a month and production at the plant keeps pace with this average demand. Each box of cereal costs Crunchy

$3 and is sold to the retailer at a wholesale price of $5. Both Crunchy and the retailer use a holding cost of 20 percent. For

each order placed, the retailer incurs an ordering cost of $200. Crunchy incurs the cost of transportation and loading that 

a. Given that it is trying to minimize its ordering and holding costs, what lot size will the retailer ask for in each order?

What is the annual ordering and holding cost for the retailer as a result of this policy? What is the annual

ordering and holding cost for Crunchy as a result of this policy? What is the total inventory cost across both parties

as a result of this policy?

b. What lot size minimizes the inventory costs (ordering, delivery, and holding) across both Crunchy and the

retailer? How much reduction in cost relative to (a) results from this policy?

c. Design an all unit quantity discount that results in the retailer ordering the quantity in (b).

d. How much of the $1,000 delivery cost should Crunchy pass along to the retailer for each lot to get the retailer to

order the quantity in (b)?

12. The Orange company has introduced a new music device called the J-Pod. The J-Pod is sold through Good Buy, a major

electronics retailer. Good Buy has estimated that demand for the J-Pod will depend on the final retail price p according to

the demand curve  Demand D = 2,000,000 – 2,000p

The production cost for Orange is $100 per J-Pod.

a. What wholesale price should Orange charge for the J-Pod? At this wholesale price, what retail price should

Good Buy set? What are the profits for Orange and Good Buy at equilibrium?

b. If Orange decides to discount the wholesale price by $40, how much of a discount should Good Buy offer to

customers if it wants to maximize its own profits? What fraction of the discount offered by Orange does Good Buy

pass along to the customer? 

3. The manager at Goodstone Tires, a distributor of tires in Illinois, uses a continuous review policy to manage inventory.
The manager currently orders 10,000 tires when the inventory of tires drops to 6,000. Weekly demand for tires is normally
distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each
tire costs Goodstone $40, and the company sells each tire for $80. Goodstone incurs a holding cost of 25 percent. How
much safety inventory does Goodstone currently carry? At what cost of understocking is the manager’s current inventory
policy justified? How much safety inventory should Goodstone carry if the cost of understocking is $80 per tire in lost
current and future margin?

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