Task Question to be done in Word:

e) Caltex also sells toilet paper (in 20-roll pack), among other things. The average demand is 1,500 packs each month The petrol station incurs a fixed order placement, transportation, and receiving cost of $200 each time an order is placed with the supplier. It also incurs a holding cost of 10 per cent of the unit cost of the product. The normal wholesale price is $8 per pack. Recently, the supplier offered all-unit quantity discount to Caltex to promote sales. The price schedule is as follows:

1) What is the economic order quantity (EOQ) of 20-roll toilet paper packs per lot for Caltex if there is no volume discount?

2) What is the total annual cost for Caltex assuming there is no volume discount from the supplier and the price per pack is $8?

3) What is the optimal order quantity if Caltex decides to take the volume discount? You need to show the calculations of EOQs and total costs at all the three prices.

4) What is the new total annual cost for Caltex upon taking the volume discount?

5) What is the annual saving for Caltex upon taking the quantity discount in comparison with the normal situation when there is no volume discount?

f) Conduct your own research and find out what the sanitary paper product manufacturing industry usually does in forecasting demand. You may wish to analyse and discuss based on product value, product volume, and product flow as different product characteristics may require different methods to forecast the demand accurately. Give examples and use up-to-date references to support your arguments.

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