Generators R Us (GRU) is a leading manufacturer of partible electric generators used for emergency power supply in both civil and private disaster situations. Each year it produces 16,000 of its model HI-360 units. This model used two bearings, which the company purchases from an outside vendor. A review of accounting and usage records reveals the following information: labor for installing the bearings = $8 per generator; per-unit cost of bearings = $25; delivery charges per order = $5; processing costs per order = $6; mailing expenses per order = $2; and the estimated cost of carrying one bearing in inventory for the entire year = 35 cents. GRU also found that on average four days elapse between the time an order is placed and the time items are received. Required a. Compute the economic order quantity. b. Compute the reorder point. Assume that the HI-360 model is manufactured for 350 days each year.
Generators R Us (GRU) is a leading manufacturer of partible electric generators used for emergency power supply in both civil and private disaster situations. Each year it produces 16,000 of its model HI-360 units. This model used two bearings, which the company purchases from an outside vendor. A review of accounting and usage records reveals the following information: labor for installing the bearings = $8 per generator; per-unit cost of bearings = $25; delivery charges per order = $5;
Required
a. Compute the economic order quantity.
b. Compute the reorder point. Assume that the HI-360 model is manufactured for 350 days each year.
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