b) find the annual holding costs c) find the annual ordering costs d) What is th
ID: 354158 • Letter: B
Question
b) find the annual holding costs
c) find the annual ordering costs
d) What is the reorder point
Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 14,300 units Southeastern estimates its annual holding cost for this item to be $26 per unit. The cost to place and process an order from the supplier is $77. The company operates 300 days per year, and the lead time to receive an order from the supplier is 2 working days a) What is the economic order quantity?units (round your response to the nearest whole number).Explanation / Answer
Demand= 14300
Annual holding cost = 26 $
Ordering cost = 77 $
EOQ= ((2*Annual Demand*Cost per order)/Holding cost)1/2
Demand= 14300 units annually
Order cost= 77 $
Holding cost= 26 $
EOQ= (2*14300*77/26)1/2 = 291.03 = 291 units
Ordering cost = (Annual demand/EOQ)*ordering cost
= (14300/291)*77 = 3783.84 = 3784 $
holding cost = (EOQ/2)*Holding cost
= (291/2)*26 = 3783 $
Reorder point = Average daily demand*lead time = (14300/300) *2 = 95.33 = 95 units
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