Westside Auto purchases a component used in the manufacture of automobile generators directly from the supplier. Westside’s generator production operation, which is operated at a constant rate, will require 1000 components per month throughout the year (12,000 units annually). Assume that the ordering costs are $25 per order, the unit cost is $2.50 per component, and the annual holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a lead time of 5 days. Answer the following inventory policy questions: What is the EOQ for this component?What is the reorder point?What are the total annual holding and ordering costs associated with your recommended EOQ?

Annual Demand (D) = 12,000 unitsOrdering costs (O) = $25 per orderUnit cost (P) = $2.50Annual…

Answered: What is the EOQ for this component?…

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Westside Auto purchases a component used in the manufacture of automobile generators directly from the supplier. Westside’s generator production operation, which is operated at a constant rate, will require 1000 components per month throughout the year (12,000 units annually). Assume that the ordering costs are $25 per order, the unit cost is $2.50 per component, and the annual holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a lead time of 5 days. Answer the following inventory policy questions:

What is the EOQ for this component?
What is the reorder point?
What are the total annual holding and ordering costs associated with your recommended EOQ?

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