Joe Henry\'s machine shop uses 2,520 brackets during the course of a year. These
ID: 360246 • Letter: J
Question
Joe Henry's machine shop uses 2,520 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: Annual demand Holding cost per bracket per year Order cost per order 2,520 $1.60 $19.75 2 days 250 Working days per year a) What is the EOQ? L units (round your response to two decimal places). b)What is the average inventory if the EOQ is used?units (round your response to two decimal places) What would be the annual inventory holding cost? (round your response to two decimal places). C)Given the EOQ, how many orders will be made annually?orders (round your response to two decimal places) What would be the annual order cost? s(round your response to two decimal places) d)Given the EOQ, what is the total annual cost of managing (ordering and holding) the inventory? s (round your response to two decimal places). e)What is the time between orders?days (round your response to two decimal places). What is the reorder point (ROPunits (round your response to two decimal places).Explanation / Answer
Annual demand (D) = 2520
Ordering cost (S) = $19.75
Holding cost (H) = $1.60
Lead time (L) = 2 days
Working days per year = 250
Daily demand (d) = D/number of days per year = 2520/250 = 10.08
a) Economic order quantity(Q*) = sqrt of (2DS / H)
= [(2 x 2520 x 19.75)/1.60]
= 249.42 units
b) If EOQ is used, average inventory = Q*/2 = 249.42/2 = 124.71
Annual inventory holding cost = (Q/2)H = (249.42/2)1.60 = 124.71x1.60 = $199.54
c) Number of orders per year = D /Q* = 2520/249.42 = 10.10
Annual order cost = Number of order per year x S = 10.10x19.75 = $199.48
d) Annual cost of managing inventory = holding cost + ordering cost
= $199.54 + $199.48
= $399.02
e) Time between orders = number of working days per year / number of orders per year
= 250 / 10.10
= 24.75 days
f) Reorder point = d x L = 10.08 x 2 = 20.16 units
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