the annual demand of car is 15000, the tire they pay 10 per tire with carrying c
ID: 345918 • Letter: T
Question
the annual demand of car is 15000, the tire they pay 10 per tire with carrying cost of 20% of the tire cost. Each order cost 30 to process. Each 1st day of month place order and same quantity for month. Calculate current ordering cost, carrying cost, total inventory cost/year, EOQ the annual demand of car is 15000, the tire they pay 10 per tire with carrying cost of 20% of the tire cost. Each order cost 30 to process. Each 1st day of month place order and same quantity for month. Calculate current ordering cost, carrying cost, total inventory cost/year, EOQExplanation / Answer
Annual demand for cars is 15000.For 1 car the demand for tires = 4.so for 15000 cars the demand for tires = 15000x4 = 60000 tires
Annual demand (D) = 60000 tires
Ordering cost (S) = $30
Carrying cost (H) = 20% of cost = 20% of $10 = $2
Economic order quantity (Q) = sqrt of (2DS / H)
= sqrt of [(2 x 60000 x 30)/2]
= sqrt of 1800000
= 1341.64 or rounded to 1342 tires
Annual Ordering cost = (D/Q) S = (60000/1342)30 = $1341.28
Annual carrying cost = (Q/2)H = (1342/2)2 = $1342
Total inventory cost = Ordering cost + carrying cost
= $1341.28 + $1342
= $2683.28
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.