and sells a wide array of things. In fact, the firm operates more than 2,050 full-service stores in the United States, Canada, Puerro Rico, and Mexico. Each store stocks approximately 40,000 different kinds of build-materials, home improvement supplies, and lawn and garden products.Not long ago, Home Depot was considering stocking a new deluxe toilet unit in its bathroom fixtures department. It was trying to broaden its product line to appeal to home improvement contractors, and this item had recentlv been featured in Architectural Digest. The toilet seat contains a special feature. Siting on the seat activates a system that sprays up a fine mist of air freshener and plays music. You can choose the scent and whatever musical selection moves you. (We are not making this up!)The new toilet units had been test marketed successfully, and Home Depot estimated that sales would average 1,000 units per year. It would COSt $100 to keep a unit in inventory for a year, and the fixed reordering cost would be $80. Home Depot's COSt would be $500 per unit.SAFETY STOCKS AND EXPECTED STOCKOUT COSTSEXPECTEDEXPECTEDREORDERSAFETYSTOCKOUTREORDERSAFETYSTOCKOUTPOINTSTOCKCOSTPOINTSTOCKCOSTS100S5~O2010$2001222')0221219214'I2'i'i141418616622'i26161821882102818180QUESTIONS1.What is Home Depot's EOQ for the deluxe toilet units? Using the EOQ, what are the average inventory, number of orders per year, and the total annual cost of maintaining the inventory of deluxe toilet units) What would the EOQ be if expected sales were 2,000 units per year, ordering COSt was $160, and the carrying cost was $200?2.The average lead-time demand is 10 units. The table above shows how the expected annual stockout cost depends on the amount of stock. What is the optimal safety stock and reorder point?3.The supplier of the deluxe toilet units has offered Home Depot a 2% discount if it orders 50 or more units each time. Should Home Depot order 50 units each time it buys?4. Home Depot can sell 1,000 units per year at a price of $750 per unit. It estimates that it could sell 1,100 units per year if it dropped the price to $700, and that it would sell only 900 units if it raised the price to $800 per unit.a.What is Home Depot's EOQ assuming that thequantity discounts are available and that sales are900 units/year or 1,100 units/year?b.What is the total annual inventory Cost (including carrying cost, ordering cost, stockout cost, and discountstaken) for each of the three unit prices?c.Which price$700, $750, or $800 per unit, maximizesthe annual profit Home Depot can expect toearn from selling these deluxe toilet units?****See the attached scan for table or safety stocks and expected stout costs.
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