Joe Henry\'s machine shop uses 2,300 brackets during the course of a year. These
ID: 366111 • Letter: J
Question
Joe Henry's machine shop uses 2,300 brackets during the course of a year. These brackets are purchased from a sup- plier 90 miles away. The following information is known about the brackets Annual demand: Holding cost per bracket per year: Order cost per order Lead time: Working days per year 2,500 $1.50 $18.75 2 days 250 a) Given the above information, what would be the economic b) Given the EOQ, what would be the average inventory? What e) Given the EOQ, how many orders would be made each year? d) Given the EOQ, what is the total annual cost of managing the n orders? order quantity (EOQ)? would be the annual inventory holding cost? What would be the annual order cost? invento e) What is the jinExplanation / Answer
a. EOQ ={ (2*Annual Demand * Order cost) / Holding cost }0.5
=( 2*2500*18.75/1.5)0.5
EOQ = 250
b. Annual holding cost = average inventory level x holding cost per unit per year
= order quantity/2 x holding cost per unit per year =( 250* 1.5 )/2 = $375/2 = $ 187.5
$ 187.5= avg inventory level * holding cost per unit per year
$187.5/ $1.5 = 125
Annual holding cost = $ 187.5
avg inventory level = 125
c. Number of orders = Annual Demand / EOQ = 2500 / 250 = 10
Annual ordering cost = no. of orders placed in a year x cost per order
= annual demand/order quantity x cost per order = 10*18.75 = $187.5
d. Total annual cost = holding cost + ordering cost = $ 187.5 + $187.5 = $ 375
e. Time between orders = No. of working days per year / number of orders = 250 /10 = 25 days
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