calculate the EOQ and reorder point for each of the book types. Lead time for an
ID: 2465162 • Letter: C
Question
calculate the EOQ and reorder point for each of the book types. Lead time for any type of book is 5 weeks.
Assume the demand data given in the spreadsheet is normally distributed. The accounting department estimates the average costs for A, B, and C books to be $5.05, $7.39, and $10.25, respectively, for a single copy. It costs 45% per year, per unit, for annual holding costs. The batch size is 3,500 for an A book, 1,000 for a B book, and 500 for a C book. The administrative cost for ordering a batch of a book has been estimated to be $125.
What is your recommendation for each type of book? Why? How much safety stock should be held, by type of book? What is the total cost of your recommendation? What are the advantages and disadvantages of each option?
Cost Book A $ 5.05 Book B $ 7.39 Book C $ 10.25 Square root 2 times demand x set up cost divided by holding cost Holding cost is 45% per year per unitExplanation / Answer
EOQ =Underroot 2AO/Carrying Cost per unit p.a.
Company Should Employ EOQ System to minimize cost.
Week A Books B Books C Books 1 525 154 75 2 517 147 151 3 562 134 77 4 455 145 78 5 399 108 79 6 526 139 80 7 584 203 81 8 542 154 231 9 511 132 82 10 602 168 233 11 289 177 159 12 602 212 84 13 355 172 160 14 329 154 237 15 535 140 87 16 571 154 163 17 384 147 164 18 641 269 90 19 382 220 90 20 655 253 241 21 581 187 92 22 435 243 243 23 447 232 169 24 399 202 95 25 367 206 171 26 487 273 96 27 579 239 172 28 545 203 248 29 617 219 99 30 364 292 249 31 582 251 175 32 499 289 102 33 568 246 102 34 486 238 103 35 323 286 254 36 623 216 180 37 459 248 255 38 452 326 256 39 728 275 107 40 631 336 183 41 483 315 259 42 619 318 185 43 393 289 186 44 421 359 111 45 636 278 112 46 600 347 113 47 462 299 264 48 683 368 114 49 659 271 265 50 431 346 117 51 501 391 267 52 494 308 118 Annual Demand 26520 12278 8104Related Questions
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