b) Joe Henry\'s machine shop uses 2,500 brackets during .1se of a year. These br
ID: 353448 • Letter: B
Question
b) Joe Henry's machine shop uses 2,500 brackets during .1se of a year. These brackets are purchased from a supplier 90 12.15 the co S? d) The following information is known about the brackets: d ink 40% per ply. Annual demand: Holding cost per bracket per year: Order cost per order: Lead time: Working days per year: 2,500 $1.50 18.75 2 days 250 ur y? a) Given the above information, what would be the economic order quantity (EOQ)? b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?Explanation / Answer
Annual Demand D = 2500
Holding cost H = 1.5 $/bracket
Ordering cost S = 18.75 $
Lead Time L = 2 days
Number of working days per year = 250
a) EOQ = SQRT(2*D*S/H) = SQRT(2*2500*18.75/1.5) = 250 brackets
b) Average inventory = Q/2 = 250/2 = 125 brackets
c) Number of orders per year = D/Q = 2500/250 = 10 orders
Annual ordering cost = Number of orders*Ordering cost = 10*18.75 = 187.5 $
d) EOQ (Annual holding cost) = (Q/2)*H = 125*1.5 = 187.5 $
e) Time between orders = Number of working days/Number of orders = 250/10 = 25 days
f) Reorder Point (ROP) = d*L = (2500/250)*2 = 20 brackets
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