5) Prince Pots produces pots and pans aplenty. The manufacturing process at Prin

Question

5) Prince Pots produces pots and pans aplenty. The manufacturing process at Prince Pots involves taking a flat sheet of steel and stamping it into a pot. Keeping inventory on-hand to stamp pots, as well as moving inventory, is an ongoing issue, one which Prince hopes you can help with. Use the following information to answer the ensuing question. Demand for pots is 26 pots a day. There are 260 working days in a year. It costs $65 to carry a pot in the warehouse over an entire year. Each order for pots cost $72. (a) Determine the economic order quantity. (b) What is the average number of pots on hand? (c ) How many orders per year will there be? (d) Report the costs associated with carrying the pots in the warehouse and the costs for ordering materials for the pots. In addition, explain how these numbers were attained from the analysis. (e ) Suppose that Prince wishes for there to be a lead time of 3 days (i.e. supply arrives 3 days before the inventory runs to zero). How many items on-hand will there be when it is time to re-order? 5) Prince Pots produces pots and pans aplenty. The manufacturing process at Prince Pots involves taking a flat sheet of steel and stamping it into a pot. Keeping inventory on-hand to stamp pots, as well as moving inventory, is an ongoing issue, one which Prince hopes you can help with. Use the following information to answer the ensuing question. Demand for pots is 26 pots a day. There are 260 working days in a year. It costs $65 to carry a pot in the warehouse over an entire year. Each order for pots cost $72. (a) Determine the economic order quantity. (b) What is the average number of pots on hand? (c ) How many orders per year will there be? (d) Report the costs associated with carrying the pots in the warehouse and the costs for ordering materials for the pots. In addition, explain how these numbers were attained from the analysis. (e ) Suppose that Prince wishes for there to be a lead time of 3 days (i.e. supply arrives 3 days before the inventory runs to zero). How many items on-hand will there be when it is time to re-order?

Explanation / Answer

demand 26 260 6760 carrying cost per unit 65 ordering cost 72 economic order quantity square root of (2*annual demand *ordering cost per order)/carrying cost per unit per year 14976 122.3765 per order number of orders per year annual demand/EOQ 55.23938 orders average number of pots in hand eoq/2 61.18823 units ordering cost at EOQ no of orders * ordering cost per order 3977.235 carrying cost at eoq 1/2 of EOQ * carrying cost per unit per year 3977.235 total inventory cost 7954.47 At eoq total inventory cost would be minimum and ordering cost and carrying cost would be equal reorder level lead time in days * average daily usage average daily consumption days reorder level 26 3 78 Units

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