You have been asked by your boss to calculate the Economic Order Quantity (EOQ) for one of the major sub-components used by your firm. You have been provided the following data: The weekly demand for this part is 125 units. The cost of the sub-component is $300. The annual holding cost is 0.5% and the ordering or setup cost is $50.

You have been asked by your boss to calculate the Economic Order Quantity (EOQ) for one of the major sub-components used by your firm. You have been provided the following data: The weekly demand for this part is 125 units. The cost of the sub-component is $300. The annual holding cost is 0.5% and the ordering or setup cost is $50.

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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It’s your responsibility, as the new head of the automotive section of Nichols Department Store, to ensure that reorder quantities for the various items have been correctly established. You decide to test one item and choose Michelin tires, XW size 185 x 14 BSW. A perpetual inventory system has been used, so you examine this, as well as other records, and come up with the following data. Cost per tire $55 each Holding cost 15 percent of tire cost per year Demand 1,180 per year Ordering cost $ 36 per order Standard deviation of daily demand 7 tires Delivery lead time 8 days Because customers generally do not wait for tires but go elsewhere, you decide on a service probability of 95 percent. Assume the…