ArtOrgan, Ltd. distributes porcine replacements for human mitral heart valves. T

Question

ArtOrgan, Ltd. distributes porcine replacements for human mitral heart valves. Their replacement valve has a demand of 12,765 units per year and sells for $7,900 per unit. The cost of ordering is $75 per order and the average carrying cost per unit per year works out to be about 5% of the cost of the valve. Lead time is 4 working days. Determine (assume 250 working days):

(a) the economic order quantity

(b) the reorder point

(c) the optimal number of orders per year

(d) the optimal number of days between any two orders

Explanation / Answer

Solution:

(a)        EOQ = 69.6 units

(b) Reorder point = 204.24

(c) Number of orders per year = 183.3

(d) Optimal number of days between orders = 1.4 working days

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