Consider the EOQ model. At the optimal order quantity, the annual holding cost is $10,000. What is the annual ordering cost? Group of answer choices $0 $2,500 $10,000 Cannot be determined $5,000
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- EOQ formula gives the order quantity that minimizes the total ordering and inventory holding cost. Although it may be thought that the simplifying assumptions of the EOQ model limits the applicability of this concept to a variety of cases, in practice, it provides satisfactory results. The reason for this is the robustness of the total cost function with respect to the choice of Q. In other words, if another order quantity is used instead of the optimal one, the overall effect of this choice on the total cost function is not that much. The objective of this question is to investigate the robustness of EOQ. The purchase price of an electronic component is $100 per unit. The holding cost is calculated directly from the opportunity cost of the money tied up according to a market interest rate of 10% per year. The annual demand is 6000 units per year and the ordering cost is $12 per order. a- What is the optimal order quantity and the optimal total ordering and holding cost? b.If the order…The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost, and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dj = annual demand for item j Cj = unit cost of item j Sj = cost per order placed for item j i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj = space required for item j The decision variables are Qj , the amount of item j to order. The model is: In…The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dj = annual demand for item j Cj = unit cost of item j Sj = cost per order placed for item j i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj = space required for item j The decision variables are Qj, the amount of item j to order. The model is:…
- The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dj = annual demand for item j Cj = unit cost of item j Sj = cost per order placed for item j i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj = space required for item j The decision variables are Qj, the amount of item j to order. The model is: (view…Rocky Mountain Tire Centre sells 20,000 tires of a particular type per year. The ordering cost for each order is $40, and the holding cost is 20% of the purchase price of the tires per year. The purchase price is $20. per tire if fewer than 500 tires are ordered, $18. Per tire if more than 500 but fewer than 1,000 tires are ordered and $17. per tire if 1,000 or more tires are ordered. Quantity Unit Price 1-499 $20. 500-999 $18. 1000 & over $17 Based on available information, lead time demand for CD-ROM drives averages 50 units (normally distributed), with a standard deviation of 5 drives. Management wants a 97% service level. What value of Z should be applied? How many drives should be carried as safety stock?Show that the optimal order quantity for the backloggeddemand model is always at least as large as the EOQ butthat the maximum inventory level for the backloggeddemand model cannot exceed the EOQ.
- Rocky Mountain Tire Center sells 20,000 go-cart tires per year. The ordering cost for each order is $40, and the holding cost is 20% of the purchase price of the tires per year.The purchase price is $20 per tire if fewer than 500 tires are ordered, $18 per tire if 500 or more-but fewer than 1,000- tires a re ordered, and $17 per tire if I ,000 or more tires areordered.a) How many tires should Rocky Mountain order each time it places an order?b) What is the total cost of this policy?15. A law firm always orders 60 cases of paper from their office supply company. They incur an annual holding cost of $15 per case and have an ordering cost of $30 each time they place an order. If their annual demand is 480 cases, how much could they save annually by switching to their economic order quantity? Group of answer choices $33 $15 $28 $25If the following data is known in determining the Quantity Discount with EOQ - Demand rate = 100.000 - Ordering Cost = 5000 - Holding/Carrying cost = 600 Price Range LOWER UPPER PRICE 1 1 1000 1000 2 1001 1500 900 3 1501 3000 800 4 3001 3500 700 5 3501 3750 650 6 3751 4000 600 Based on the data provided, determine the optimal order quantity and total cost for this case! 2 1001 1500 900 3 1501 3000 800 4 3001 3500 700 5 3501 3750 650 6 3751 4000 600
- Pingu Company manufactures winter jackets. Setup costs are $2.00. Penguin manufactures 4,000 jackets evenly throughout the year. Using the economic order quantity approach, the optimal production run would be 200 when the cost of carrying one jacket in inventory for one year is 0.40. The given solution is this: 200 = 2*setup cost* Annual Demand / Carrying cost200 = 2*2*4000/ Carrying cost40000 = 16000 / Carrying costCarrying cost = 16000 / 40000Carrying Cost = 0.4 Hence, the cost of carrying one jacket in inventory for one year is 0.4 QUESTION: How did you get the 40,000 (that was divided to 16,000)?The demand for a clothing brand is shown in the table below. The cost per order is about $4000. Cost of each unit of clothing = $5. Carrying cost percentage = 25% per item per 5 months. The analysis period = 5 month duration. Month Demand 1 400 2 300 3 200 4 400 5 500 a. Using this data, compute the solutions using the Lot for Lot and Periodic Order Quantity heuristics? Which of these heuristics would perform better and why? b. Assuming that the demand follows a normal distribution with the mean and variance from the data given above, determine the optimal order should be greater or lesser than the single period EOQ model.The Great North Supermarket stocks Munchkin Cookies. Demand for Munchkins is 5000 boxes per year (365 days). It costs the store $60 per order of Munchkins, and it costs $0.70 per box per year to keep the cookies in stock. Once an order for Munchkins is placed, it takes four days to reveive the order from a food distributor. Determine the following: a. Optimal order size (EOQ) b.Minimum total annual inventoy cost c. Reorder point (R) d. Number of orders e. Time between orders