ArtOrgan, Ltd. distributes porcine replacements for human mitral heart valves. T

Question

ArtOrgan, Ltd. distributes porcine replacements for human mitral heart valves. Their replacement valve has a demand of 12,765 units per year and sells for $7,900 per unit. The cost of ordering is $75 per order and the average carrying cost per unit per year works out to be about 5% of the cost of the valve. Lead time is 4 working days. Determine (assume 250 working days): (a) the economic order quantity (b) the reorder point (c) the optimal number of orders per year (d) the optimal number of days between any two orders

Show work for each answer.

Explanation / Answer

Solution:

(a) EOQ = 69.6 units

(b) Reorder point = 204.24

(c) Number of orders per year = 183.34

(d) Optimal number of days between orders = 1.4 working days

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