A company stocks an item that is consumed at the rate of 20 units each day. Every time an order is placed for new supply, $ 100 must be paid. A unit inventory held in stock will cost $ 0.15. (a) What is the economic order quantity (EOQ)? (b) What is the cycle time for the EOQ? (c) What is the total cost for the EOQ? (d) What is the total cost if the order quantity is 300 more than EOQ? (e) What is the optimum number of orders (rounded to the closest integer) that the company has to place each year? Assume that the company has a standing policy of not allowing shortages in demand.

A company stocks an item that is consumed at the rate of 20 units each day. Every time an order is placed for new supply, $ 100 must be paid. A unit inventory held in stock will cost $ 0.15. (a) What is the economic order quantity (EOQ)? (b) What is the cycle time for the EOQ? (c) What is the total cost for the EOQ? (d) What is the total cost if the order quantity is 300 more than EOQ? (e) What is the optimum number of orders (rounded to the closest integer) that the company has to place each year? Assume that the company has a standing policy of not allowing shortages in demand.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.
The following data are for an inventory item in which the EOQ model applies: Given: D = 10,000 units (annual demand) R = P10 per unit P = P500 per order C = 25% 0f average inventory Find: a. the number of orders per year b. the economic order quantity (EOQ) c. the amount in pesos per order d. the number of days interval between orders e. the total inventory costs
You are managing a company that stocks and distributes hardware. Thecompany employs two purchasing agents who receive combined salaries of$90,000. They process 6,000 purchase requests per year. Average inventoryin storage is $600,000, and the total cost of running the warehouse is$200,000. You are told that the company purchases 5,000 hammers per yearat a cost of $5.34 per hammer.a. Using the economic order quantity (EOQ) formula, how many hammersshould be ordered at one time?b. If the hammer vendor stated that it would charge $5.00 per hammer if youordered 200 or more at a time, what should you do?
The demand for a commodity is 40,000 units a year, at a steady rate. It costs $20 to place an order, and $0.40 to hold a unit for a year. Find the order size to minimize inventory costs, the number of orders placed each year, the length of the inventory cycle and the total costs of holding inventory for the year. What is the EOQ? What is the number of orders placed each year? What is the inventory cycle (length of time that the the order size will last)? in terms of weeks What is the total ordering & carrying costs at the EOQ level?
Joe Henry's machine shop uses 2,460 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: Annual demand 2,460 Holding cost per bracket per year $ 1.65 Order cost per order $20.00 Lead time 22 days Working days per year 250 a) What is the EOQ? b) What is the average inventory if the EOQ is used? What would be the annual inventory holding cost? c) Given the EOQ, how many orders would be made each year? What would be the annual order cost? d) Given the EOQ, what is the total annual cost of managing (ordering and holding) the inventory? e) What is the time between orders? f) What is the reorder point (ROP)?
Your firm uses a continuous review system and operates 52 weeks per year. One of the Stock-Keeping Units (SKUs) has the following characteristics:Demand = 20000 units/year = 385 units/weekOrdering cost = $40/orderHolding cost = $2/unit/yearService level = 95 percentz=1.65Lead time = 2 weeksDemand is normally distributed, with a standard deviation of weekly demand of 100 units. a)Calculate the item's EOQ. b)Find the safety stock and reorder point that provide a 95 percent service level. c)For these policies, what are the annual costs of (i) holding the cycle inventory and (ii) placing orders?
A company stocks an SKU with a weekly demand of 225 units and a lead timeof 3 weeks. Management will tolerate one stockout per year. If sigma for the leadtime is 175 and the order quantity is 800 units, what is the safety stock, the averageinventory, and the order point?
A company stocks an item that is consumed at the rate of 30 units each day. Every time an order is placed for new supply, $ 120 must be paid. A unit inventory held in stock for one week will cost $ 0.14. What is the economic order quantity (EOQ)? What is the cycle time for the EOQ? What is the total annual cost for the EOQ?
In a hardware warehouse, the independent demand for a commonly used bolt is 500 units per month. The ordering cost is $30 per order placed. The carrying cost is 25 percent per year, and each unit costs $.50.a. According to the EOQ formula, what lot size should this product have?b. How often should this product be purchased?c. A quality team has found a way to reduce ordering costs to $5. How will that change the lot size and the frequency of purchasing for this product?
A manufacturer buys cardboard boxes from a supplier. The annual demand is 40,000 boxes and is uniformly distributed. The boxes cost $5 each. The estimated order cost is $10, and the carrying cost rate is 20% per year. What is the EOQ and what is the annual order and carrying cost? How many times a year are orders placed, and what is the average time, in weeks, between orders? Using the answer from (b), if you round the average time between orders to the nearest week, what should the order quantity be? Would you recommend using this order quantity and time interval? Suppose that the actual demand turns out to be 80,000 boxes instead of 40,000 boxes.If you had used the EOQ from the (a), what would be the annual order and carrying cost be?
Edwarldo’s Manufacturing uses 2,400 units of a product per year on a continuous basis. The product Carrying Cost are $60 per year and Ordering Cost are $250. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory. Show Computations and Explanations. A. Calculate the Economic Order Quantity (round up the answer to the nearest whole unit) (Format: 111) B. Calculate the Total Cost per year to order and carry this item. (Format: 1,111) C. Their supplier has notified the company that if they increase their order quantity by 58 units, they will give the company a discount. Calculate the Dollar Discount that the company will have to at least give to Edwarldo’s Manufacturing to be indifferent. (Format: 111)
Genesis Company is a wholesaler. It purchases 60,000 units of Product X per month for sale to retailers. The cost of placing an order is P100. The cost of holding one unit of inventory for one year is P4. Note: Kindly input your answer with comma.Example: 10,000 Required: a. Compute the economic order quantity. b. How many orders would be placed under the EOQ policy? c. Compute the annual ordering cost for the EOQ. d. Compute the annual carrying cost for the EOQ. e. Compute the total inventory-related cost at the EOQ.