4) Paul and Paul Jr from Orange County Choppers are scheduling their shop demand
ID: 367809 • Letter: 4
Question
4) Paul and Paul Jr from Orange County Choppers are scheduling their shop demand for andle bars. A handle bar has a unit purchase cost of $100, an ordering cost per order of $200, and a holding cost fraction per period of .02. Determine the lot sizes by the incremental part-period algorithm from the data below: Period Demand (units) 100 4 60 10 xx-first two digits ofstudent number, YY = last two digits of student number. Provide the ordering schedule and cumulative variable costs in a table format just like seen in class.Explanation / Answer
Answer to question #a:
-------------------------------
Economic Order Quantity (EOQ) is achieved to minimise total inventory management cost of an organization
Also, EOQ = Square root (2 x F X D/ C)
F = Fixed cost per order = $ 100
D = Demand per year = 54,000 units
C = Inventory holding cost = $6 / unit
Therefore,
EOQ = Square root (2 x 100 X 54000/6) = 1341.64 = 1342 (rounded to whole number)
Owner must order 1342 units to minimize inventory costs
Answer to question #b:
-----------------------------
Number of times the shop will place order per year = 54,000 / 1342 = 40.23 times
Answer to question #c:
------------------------------
Annual inventory holding cost
= Average inventory x inventory holding cost/unit
= ½ x EOQ x Inventory holding cost/unit
= ½ x 1342 x 6 = $ 4026
Total annual inventory holding cost = $ 4026
Answer to question #d:
------------------------------
Annual ordering cost associated with the material
= $ 100 / order x 40.23 orders per year = $4023
Annual ordering cost associated with the material = $ 4023
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.