Please answer all parts. Homework: Web Chapter Save Homework Score: 0 of 12 pts
ID: 2658338 • Letter: P
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Please answer all parts.
Homework: Web Chapter Save Homework Score: 0 of 12 pts Problem 17-13 (similar to) 9 of 13 (8 complete) HW Score: 12.73%, 7 of 55 pt Question Help calculations) Knutson Products Inc. is involved in the production of airplane parts and has the following inventory, carrying, and storage costs: 1. Orders must be placed in round lots of 100 units. 2. Annual unit usage is 200,000. (Assume a 50-week year in your calculations.) o 3. The carrying cost is 10 percent of the purchase price. tio 4. The purchase price is $40 per unit. 5. The ordering cost is $400 per order 6. The desired safety stock is 3,000 units. (This does not include delivery-time stock.) 7. The delivery time is 1 week. Given the foregoing information: a. What is the optimal economic order quantity (EOQ) level? (Note that orders must be placed in round lots of 100 units.) units (Round up to the nearest hundred,) Enter your answer in the answer box and then click Check Answer. Clear All Check Answer to)Explanation / Answer
a) EOQ = Square root over ( 2 * annual demand * order cost ) / Carring cost
= Square root over ( 2 * 200000 * 400 ) / 4 = 6324.55 ...... but for the purpose of lots of 100 each it should be taken as .......... 6400 Units
b) Number of orders in a year = Annual demand / EOQ = 200000 / 6400 = 31,25 .... OR 31 Orders
c) Re-order point = consumption during the lead time = 200,000 / 50 * 1 week = 4000 Units
d) Average Inventory level = Safety stock + 1/2 * EOQ = 3000 + 1/2 * 6400 = 6200 Units
e) When annual unit sales doubles, EOQ Shall increase.
New EOQ = SQRT ( 2 * 400,000* 400) / 4 = 9000 Units.
Pecentage Increase = ( 9000 - 6400) / 6400 * 100 = 40.63 %
Elasticity of EOQ with resepect to sales = 40.63 % / 100 % = 0.4063 or 0.41
f) If carring cost double ...... EOQ Decreases .
New EOQ = SQRT[ ( 2*200,000*400)/8] = 4500 Units
% change in EOQ = ( 6400 - 4500 ) / 6400 * 100 = 29.69%
Elasticity of EOQ to carring cost = 29.69 / 100 = 0.2969
g) When Order cost doubles, EOQ shall Increase
NEW EOQ = SQRT[ ( 2*200,000*800)/4] = 9000 Units
Pecentage Increase = ( 9000 - 6400) / 6400 * 100 = 40.63 %
Elasticity of EOQ with resepect to order cost = 40.63 % / 100 % = 0.4063
h. When selling price doubles ............ NO CHANGE IN EOQ
Elasticiy of EOQ for change in selling price = 0
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