A store faces demand for one of its popular products at a constant rate of 6,600

Question

A store faces demand for one of its popular products at a constant rate of 6,600 units per year. It costs the store $65 to process an order to replenish stock and $15 per unit per year to carry the item in inventory. A shipment from the supplier is typically received 10 working days after an order is placed. The store buys the product for $70 per unit and sells it for $140 per unit. At the moment the store uses an order quantity of 440 units. Assume EOQ model assumptions are satisfied and 300 days a year If there are two blank boxes in any question, then you must put one of the following words in the second box: units, dollars, days, year, orders per year, dollars per year, units per order Answer the following questions (you should not use any commas in your answer) Use at least 4 decimals in your calculation and answers. You must solve questions [1] through (6) assuming the store uses the current order quantity Questions [8] through [10] must be solved using the optimal order quantity. [1] To fulfill the demand, the store must place orders per year 121 The average inventory level [3] The length of an inventory cycle is [4] The annual ordering cost is 151 The annual holding cost is 6] The time between any two orders is days.

Explanation / Answer

Given:

Lets first calculate the economic order size

EOQ (Q) = ((2DS)/H)^0.5 = ((2*6600*65)/15)^0.5 = 239.165

EOQ is nothing but the batch size

So, number of orders= D/Q = 6600/239.165 = 27.59 = 28 orders per year

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