Consider a basic economic order quantity (EOQ) model with the following characte

Question

Consider a basic economic order quantity (EOQ) model with the following characteristics:

Item cost: $15.

Item selling price: $20.

Monthly demand: 500 units (constant)

Annual holding cost: 9% of purchase cost

Cost per order: $18.

Order lead time: 5 days

Firm's work year: 300 days (50 weeks @ 6 days per week)

Safety stock: 15% of monthly demand

For this problem, determine the values of:

1 Q* the optimal order quantity and reorder point. 500 and 175 b) 400 and 100 400 and 175 400 and 75 none of the above M, the maximum quantity in inventory. 575 475 675 none of the above 3 T, the cycle time. a) 20 workdays 15 workdays 32 workdays 25 workdays none of the above 4Total annual inventory cost $90,540.00 $540.00 $675.00 $90,641.25 d) none of the above 5 What is the annual ordering cost? $18.00 $270.0 $1,080.00 $216.00 none of the above 6 Suppose the vendor demands purchases in multiples of 500 only What is the increase in total annual inventory cost that this causes? $13.50 $0.0 $337.50 $67.50 none of the above 7 What is the average lead time demand? 100 units 16 units 8 units 75 units c) d)

Explanation / Answer

PART 1 b) 400 AND 100

PART 2 c) maximum quantity in the inventorty is 500

PART 3 a) the cycle time 20 days

PART 4 b) 540 as 400*15*9%

PART 5 D) 216 that is 18*12

PART 6 e) none of the above it should increase by 100*15*9 i.e 135

PART 7 a) 100

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