Tender Most sells smoked turkeys in the U.S. through a network of 650 company owned retail outlets. In 2014, sales of Tender Most Turkeys were $4,350,000. Sales are expected to remain steady during 2015. Turkeys are sold at $4 per pound to the retailers. Turkeys are purchased from a supplier FOB origin and sold to retailers FOB destination. Approximately 40% of sales revenue is direct variable cost and 60% of the direct variable costs are actual turkey costs. Shelf life for the turkeys is 14 days if refrigerated and 7 days without refrigeration. Currently, Tender Most uses economic order quantity to purchase turkeys from the supplier and uses rail to bring product into its distribution facility and truck to deliver to the retailers. It takes approximately 8 days to deliver turkeys to the supplierA????1s factory and another 2 days to deliver them to retail outlets. The turkey is shipped in packs of 25 pounds. Inventory carrying cost is 21% per year and in-transit carrying cost is 18% per year. Order processing costs are estimated at $20 per order. Inbound transportation via rail is $8 per hundred pounds. Outbound transportation via commercial truck is $10 per hundred pounds.

The company wanted to investigate an alternate mode of transportation, air-carrier service. This service will bypass the distribution facility and use an air-carrier service to deliver product directly from the supplier to the retail outlets.

Costs for this alternatives are:

Air–$10.50 for the first 10 pounds and $0.50 per pound for all weight over 10 pounds. Guarantee delivery anywhere in the U.S. in 2 days.

Determine how Tender Most should order and ship its product by doing the following.

1. Compute EOQ, in cases for 2015.

2. Determine total annual logistics costs associated with current shipping practices by rail and commercial truck.

i. Safety stock is 550 cases

ii. 360 working days per year

iii. Annual costs consists of ICC, OC, ITCC, inbound transportation, outbound transportation.

iv. Per unit value of turkey should be determined based on sales to retailers.

3. What will total annual logistics costs be if the company uses the air carrier option? (Note: Calculations should recognize the affect this decision has on EOQ, safety stock, average inventory, and in-transit inventory.)

Average Variable Cost
Suppose that in a fast food chain the marginal productivity (3 sandwiches per employee-hour) is below average productivity (5 sandwiches per employee-hour). What will happen to average variable cost as output rises (as more sandwiches are delivered in the store)? Why?

Why has prototyping become a popular way to develop business applications? What are prototyping’s advantages and disadvantages?

 

What distinguishes a functional matrix from a project matrix?

Multiple regression is a procedure used to measure the relationship of one variable with two or more other variables. Regression provides a relational statement rather than a causal statement with regard to the relationship. The basic formula for a multiple regression equation is: yi′ = a + bxi + czi + ei For a regression equation to provide meaningful information, it should comply with the basic criteria of goodness of fit and specification analysis. Specification analysis is determined by examining the data and the relationships of the variables for (a) linearity within a relevant range, (b) constant variance of error terms (homoscedasticity), (c) independence of observations (serial correlation), (d) normality, and (e) multicollinearity. Required: (1) Explain what is meant by the following: “Regression provides a relational statement rather than a causal statement.” (2) Explain the meaning of each of the symbols that appears in the basic formula of the multiple regression equation just stated. (3) Identify the statistical factors used to test a regression equation for goodness of fit and, for each item identified, indicate whether a high value or a low value describes a good fit. (4) Explain what each of the following terms means with respect to regression analysis: (a) Linearity within a relevant range (b) Constant variance (homoscedasticity) (c) Serial correlation (d) Normality (e) Multicollinearity