A candle shop sells a variety of candles at Beachfront Village. The shop operate
ID: 329341 • Letter: A
Question
A candle shop sells a variety of candles at Beachfront Village. The shop operates 20 days a month. A specially scented candle has a MONTHLY demand of 360 boxes and the demand is constant throughout the month. This candle is produced in-house at a rate of 36 boxes per DAY. It costs $60 to set up production equipment and tools to produce this costs? O The inventory cycle time is less than 10 days. OThe minimum total inventory cost (i.e. setup cost and holding cost) is more than $250 per MONTH OIt takes about 6 days to produce all boxes requested in one order. O The optimal/economic order quantity is less than 200. ofExplanation / Answer
The economic order quantity for the process is
EOQ = [ 2 x360x60 /2]1/2 = 146.96
No. of orders = 360 /146.96 =3
No. of days needed to produce one order = order size / production per day =147 / 36 = 4.08
Inventory cycle stock = EOQ /2 = 147/2 = 73.5 =74
Inventory cycle time = Inventory cycle stock / demand per day = 74/36 = 2 days ( Approx.)
Total cost per month = Set up cost + holding cost
= 60x3 + holding cost per unit x inventory cycle stock
= 60x3 + 2x 74 = 328
Hence options 1,2 and 4 are correct.
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