11:17 1 You are logged in as Trevonne Hatter A company uses a product ata consta
ID: 2430107 • Letter: 1
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11:17 1 You are logged in as Trevonne Hatter A company uses a product ata constant rate of 9,000 units per year The product is purchased from a supplier 5 of each unit is $110 and the inventory holding cost is $25 per unit per year. The ordering cost is $90 per order. It takes about 6 days for an order to arrive. The store sells the product for $210 per unit. At the moment the company uses an order quantity of 600 units. Assume EOQ model assumptions are satisfied and 300 days a year 0 miles away. The cost If there are two blank boxes in any question, then you must put one of the following words in the second box: units, dollars, days, year, orders per year, dollars units per order Do NOT use any comma in your answer per year [1] Under the current order quantity, the maximum inventory level is 2] Under the current order quantity, the annual ordering cost isExplanation / Answer
In the given situation we should use the concept of Economic Ordering Quantity.
EOQ can be calculated by using the formula as below:
EOQ=(2*Q*O/C)1/2
Where, Q= Annual Consumption=9000 units
O=Ordering Cost =$ 90 per order
C= Carring cost per unit per annum=$25 per unit p.a
So here EOQ=(2*9000*90/25)1/2
=255 units
Answer to question 3 is 255 units
Answer to Question1:
Here re order level is 600 units
Lead Time is 6 days
Average Consumption=9000/300=30
Therefore Maximun Level= 600-30*6
=420 Units
Answer to question 2:
Annual ordering Cost=(Total Quantity Require In a year/ Order Quantity)* Cost per order
=9000/600*90
=$1350
Answer to question 4:
We can obtain optimum holding cost at EOQ level which is 255 units.
Therefore optimum holding cost= 255*25=$6375
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