A car dealer pays $17,985 for each car purchased

Subject:FinancePrice: Bought3

Share With

A car dealer pays $17,985 for each car purchased. The annual holding

rate is estimated at 25%, and the ordering cost is $7,558. The dealer is selling an average of 516 cars a year.
1.     The dealer used to order the same amount on the average every three months. How many cars does he order each time?
a.     42 (rounded up)
b.     42*3
c.      129
d.     172
2.     The dealer turns to the EOQ policy.  The dealership experiences lead time of 1.2 cycles. What is the lead-time in working days (360 working days a year)?
a.     0.0968
b.     Can't answer, because the cycle is unknown
c.   The lead-time is related to the reorder point, but the reorder point is unknown.
d.     Between 34 and 35 working days.
e.     None of the above
3.     Note the new information:
·        The dealership can only park 45 cars in its small parking lot. Therefore, if needed, it will lease a nearby bigger parking lot, and use it to park access inventory.
·        The dealer can get a discount of $1000 on the car's price if his order size is 275 cars or more.
3-1: If the dealer rejects the discount offer, what will be his order size?
a.     42 cars
b.     43 cars
c.      45 cars
d.     None of the above.
3-2: If the dealer decides to accept the offer to order 275 cars, he uses the leased parking lot as a "Warehouse", and each time a car is sold from the small parking lot, he transfers a car from the leased large lot. Therefore, in his own lot, there are all the time 45 cars on display, but the inventory in the large lot is gradually depleting. What is the average inventory the dealership carry in the leased parking lot?
a.     275 cars            
b.     275/2 cars
c.      38+(275/2)          
d.     237/2                          
3-3 A car kept in the leased parking lot costs the dealer additional $250 in holding cost (which increases Ch­). Calculate the annual total cost if the dealer decides to accept the "275" deal. Break down the costs: Annual Ordering cost, Annual Holding cost in the small parking lot, Annual Holding cost in the leased parking lot, Annual Purchasing cost.