Tim Madsen is the purchasing agent for Computer Cen-ter, a large discount computer store. He has… 1 answer below »

Tim Madsen is the purchasing agent for Computer Cen-ter, a large discount computer store. He has recently added thehottest new computer, the Power model, to the store’s stock ofgoods. Sales of this model now are running at about 13 per week.Tim purchases these customers directly from the manufacturer ata unit cost of \$3,000, where each shipment takes half a week toarrive.Tim routinely uses the basic EOQ model to determine thestore’s inventory policy for each of its more important products. Forthis purpose, he estimates that the annual cost of holding items ininventory is 20 percent of their purchase cost. He also estimates thatthe administrative cost associated with placing each order is \$75.T (a) Tim currently is using the policy of ordering 5 Power modelcomputers at a time, where each order is timed to have theshipment arrive just about when the inventory of these com-puters is being depleted. Use the Solver version of the Ex-cel template for the basic EOQ model to determine the var-ious annual costs being incurred with this policy.T (b) Use this same spreadsheet to generate a table that showshow these costs would change if the order quantity werechanged to the following values: 5, 7, 9, . . . , 25.T (c) Use the Solver to find the optimal order quantity.T (d) Now use the analytical version of the Excel template for thebasic EOQ model (which applies the EOQ formula directly)to find the optimal quantity. Compare the results (includingthe various costs) with those obtained in part (c).(e) Verify your answer for the optimal order quantity obtained inpart (d) by applying the EOQ formula by hand.(f) With the optimal order quantity obtained above, how frequentlywill orders need to be placed on the average? What should theapproximate inventory level be when each order is placed?(g) How much does the optimal inventory policy reduce the totalvariable inventory cost per year (holding costs plus adminis-trative costs for placing orders) for Power model computersfrom that for the policy described in part (a)? What is the per-centage reduction?