Joan Zorba orders calculators for her office supply stores. Each calculator cost
ID: 360639 • Letter: J
Question
Joan Zorba orders calculators for her office supply stores. Each calculator cost $35, currently she is ordering 230. Daily demand for these calculators is 54. The cost to re-order this item is estimated at $44, while the annual inventory holding cost is 22%. Orders are received eight working days after an order is placed. The office operates 52 weeks per year, 6 days per week.
What is the total annual cost using the EOQ?
Greater than or equal to $1688 and less than or equal to $1788
Greater than or equal to $3377 and less than or equal to $3477
Greater than or equal to $9948 and less than or equal to $9990
Greater than or equal to $4475 and less than or equal to $4576
Determine the reorder point using EOQ.
a)Greater than or equal to 2053 and less than or equal to 2064
Greater than or equal to 431 and less than or equal to 443
Greater than or equal to 6 and less than or equal to 25
Greater than or equal to 53 and less than or equal to 57
What is the duration of a cycle (in days) associated with the EOQ?
Greater than or equal to 6 and less than or equal to 10
Greater than or equal to 38 and less than or equal to 48
Greater than or equal to 58 and less than or equal to 68
Greater than or equal to .001 and less than or equal to 3
a)Greater than or equal to $1688 and less than or equal to $1788
b)Greater than or equal to $3377 and less than or equal to $3477
c)Greater than or equal to $9948 and less than or equal to $9990
d)Greater than or equal to $4475 and less than or equal to $4576
Explanation / Answer
Economic Order quantity ( EOQ ) will be calculated as per following formula :
EOQ = Square root ( 2 x Co x D / Ch )
Where ,
D = Annual demand = 54 / day x 6 days/ week x 52 weeks = 16848
Ch = annual unit holding cost = 22% of unit cost $35 = $7.7
Co = Ordering cost = $ 44
Therefore ,
EOQ = Square root ( 2 x 44 X 16848 / 7.7) = 438.80 ( 439 ROUNDED TO NEAREST WHOLE NUMBER )
Therefore,
Annual ordering cost
= Ordering cost x Number of orders
= Co x Annual demand/ EOQ
= $44 X 16848 /439
= $1688.63
Annual inventory holding cost
= Annual unit holding cost x Average inventory
= Annual inventory cost x EOQ/2
= 7.7 X 439/2
= $1690.15
Thus , Total annual cost
= Annual ordering cost + Annual inventory holding cost
= $ 1688.53 + $1690.15
= $3378.68
ANSWER : b) GREATER THAN OR EQUAL TO $3377 AND LESS THAN OR EQUAL TO $3477
Order lead time = 8 days ( since it takes 8 days to receive once order is places )
Therefore ,
Reorder point = Average daily demand x Lead time
= 54 x 8
=432
REORDER POINT : b) GREATER THAN OR EQUAL TO 431 AND LESS THAN OR EQUAL TO 443
Duration of an EOQ cycle
= EOQ/Annual demand x 312 days in a year
= 439/16848 x 312
= 8.13 days
DURATION OF A CYCLE ASSOCIATED WITH EOQ : a) GREATER THAN OR EQUAL TO 6 AND LESS THAN OR EQUAL TO 10
ANSWER : b) GREATER THAN OR EQUAL TO $3377 AND LESS THAN OR EQUAL TO $3477
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