A store 1 aces demand for one of its popular products at a constant rate of 7, 2
ID: 470625 • Letter: A
Question
A store 1 aces demand for one of its popular products at a constant rate of 7, 200 units par yaw. ft costs me store $90 lo process an order to replenish stock and $25 per unit per year to carry the item in inventory. A shipment from the suppler is typically received 10 working days after an order a placed. The store buys the product for $110 per unit and sells it for $210 per unit. At the moment the store uses an order quantity of 480 units. Assume EOQ model assumptions are satisfied and 300 days a year. If there are two blank boxes in any question, then you must put one of the following words in the second box: units, dollars, days. year, orders per year, dollars per year, units per order Answer the following questions (you should not use any commas in your answer) You must solve questions [1] through [6] assume the store uses the current order quantity. Questions [8] through [10] must be solved using the optimal order quantity. To fulfill the demand, the store must place The average inventory level The length of an inventory cycle is The annual ordering cost is The annual holding cost is The time between any two orders is days.Explanation / Answer
Given
Annual demand D = 7200 units
Order cost S =$90
Holding cost H = $25
Lead time L =10 days
Item cost C = $110 per unit
Selling price P= $210 per unit
Order quantity Q= 480 units
300 days a year
1) No of orders per year = D/Q = 7200/480 = 15 ORDERS
2) Average inventory level = Q/2 = 480/2 = 240 UNITS
3) the length of inventory cycle = Q/D = 480/7200 = 0.0667
Since there are 300 days Inventory cycle = 0.0667*300 = 20 .01 days
4) Annual Ordering cost = (D/Q)S = (7200/480) 90 = $1350
5) Annual Holding cost = (Q/2)H = (480/2)25 = $6000
6) Time between orders = no of working days per year/ no of orders per year = 300/15 = 20 days per order
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