The current order quantity for Electric Powerbars is 100 bars. The order cost is

Question

The current order quantity for Electric Powerbars is 100 bars. The order cost is $10 per order, the holding cost is $0.25 per box, and the annual demand is 2,000 bars per year.

A. Calculate the annual holding cost plus the annual ordering cost to get the total annual cost when using an order quantity of 100 bars. (Show your work)

B. Calculate the EOQ and the total annual cost for this order quantity. (Show your work)

C. How many orders per year are necessary when Q = 100? How many orders per year are necessary for the EOQ in part b? (Show your work)

D.Graph the annual inventory cost (IC) using MS Excel. Show the holding cost, ordering cost, and total inventory cost as a function of order size Q. (Show your work)

Explanation / Answer

Solution Part D

Solution Part A Annual Demand 2000 bars per year Ordering Cost 10 per order Holding Cost 0.25 per box Order Quantity (Q) 100 bars Annual holding Cost* 12.5 per yer * Holding cost per box x Cycle Stock Cycle Stock = Order Quantity/2 Annual Ordering Cost** 200 per year **Ordering cost per order x # of Orders # of orders = Annual Demand / Q Total Annual Cost*** 212.5 per year *** Annual Holding Cost + Annual Ordering Cost

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