Use complete sentences. Show and label all work to receive any credit for the ho
ID: 2564082 • Letter: U
Question
Use complete sentences. Show and label all work to receive any credit for the homework. 1 Economic Order Quantity (EOQ): a. The following information is provided you by the inventory manager for LockTite Inc. Units of inventory required for the year 20,000 Cost to place an order Cost to carry a unit in inventory Determine the economic order quantity (EOQ) for LockTite Inc. $60 $12 b. Busser's EOQ is 1,500 units. Busser's normal demand for the year is 54,000 units. Usually five days are needed from the time an order is placed until it arrives from the supplier. Assuming Busser operates 360 days a year, what is the reorder point? c. Expert Inc. has determined that their EOQ is 500 units. Normal demand is 3,125 units a year. Given that the cost to place an order is $10 and the cost to carry a single unit in inventory is $.025 what are the total ordering and carrying costs for the year?Explanation / Answer
.a.
Assume Economic Order Quantity (EOQ)=Q
Average inventory =Q/2
Total Cost to carry inventory=(Q/2) *$12
Number of purchase orders=20000/Q
Total cost of ordering =(20000/Q)*$60
At Economic Order quantity,
Cost of carrying Inventory=Cost of ordering
(Q/2)*12=(20000/Q)*60
Q^2=(20000*60)/6=200000
Q=(200000^(0.5))=447.2136
ECONOMIC ORDER QUANTITY=447
.b. Reorder point =Lead time consumption
Lead time= 5 days
Annual consumption =54000units
Number of days in a year=360
Dail consumption =54000/360=150
Lead time consumption =150*5=750
Reorder point=750 units
.c. Number of orders in a year=( Annual consumption)/(ordering Quantity)
Number of orders in a year=3125/500=6.25
(Rounded to 6)
Number of orders=6
Total ordering cost=6*$10=$60
Average inventory=500/2=250 units
Total carrying cost=250*0.25=$62.5
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.