Introduction to management science coursework Research Paper

Introduction to management science coursework - Research Paper Example better analysis, we have separated the data into Small debtors (250 customers owing in total $86,370) and Big debtors (30 customer owing in total $43,630). This division resulted in significant increase in correlation coefficient for both groups in comparison to the general population. Correlation coefficient values (0.780 and 0.655) indicate strong positive relationship between amount of debt and number of days. That means that customers who receive bigger amount of credit tend to pay later compared to the group's average. An average big debtor pays back later than the average small debtor (19.2 vs. 14.1 days on average). It is recommended: To implement stricter credit policy and receivables collection for high amounts of credit for each group separately (e.g. more than $500 for small debtors and more than $1,500 for big debtors); To concentrate on big debtors as, on average, they pay later and own significant amounts (less than 11% of customers owe 33.6% of the total amount of receivables). 3. 'All-For-Kids': i. Storage costs: one pack gets allocated the cost of renting 1.5/15 = 0.1 feet (10) Let S be average stock throughout the year. Then annual holding stock cost is: 0.15*2.50*365*S + 10*S = 146.9*S Storage cost constitutes 10S/146.9S = 6.8% out of total holding stock cost. ii. The quantity ordered should equal to 2S. With the optimal order schedule the cost of order-handling and shipment would offset the cost of holding one more additional day of stock: 0.15*2.50*S + (10/365)*S = 30 Solving we find S = 75. The optimal order should be 2S = 150 packs and made every three working days. iii. It has been assumed that when the new order is delivered the actual quantity on stock is zero. It is not very realistic with regard to real businesses because of demand...However, the two distinct groups in the set can be seen and, for purpose of better analysis, we have separated the data into Small debtors (250 customers owing in total $86,370) and Big debtors (30 customer owing in total $43,630). This division resulted in significant increase in correlation coefficient for both groups in comparison to the general population. Correlation coefficient values (0.780 and 0.655) indicate strong positive relationship between amount of debt and number of days. That means that customers who receive bigger amount of credit tend to pay later compared to the group's average. An average big debtor pays back later than the average small debtor (19.2 vs. 14.1 days on average). iii. It has been assumed that when the new order is delivered the actual quantity on stock is zero. It is not very realistic with regard to real businesses because of demand fluctuations and safety stock that is usually kept. Conducting the similar analysis for lower limit of every range, we see that in all cases additional costs are higher than additional savings and the store's manager should keep the order level at 150 packs.