The Trektronics store beings each week with 480 phasers in stock. This stock is

Question

The Trektronics store beings each week with 480 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $43 per year and the fixed order cost is $87. What are the current total carrying costs? (Do not round intermediate calculations.) What are the current restocking costs? (Do not round intermediate calculations. What is the economic order quality? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16) Should Trektronics increase or decrease its order size? Decrease Increase How many orders per year will Trektronics place under the new policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

The carrying costs are the average inventory times the cost of carrying an individual unit, so:

Carrying costs = (480/2)($43) = (240)($43) = $10,320

The order costs are the number of orders times the cost of an order, so:

Restocking Cost = 52*$87 =4524

EOQ

=[(2T × F)/CC]1/2

'=[2(52)(480)(87)/43]1/2

= 318 Phrasers

The optimal number of orders per year will be the total units sold per year divided by the EOQ, so:

Number of orders per year = 52(480) / 318 = 24960 / 318 = 78.5

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