Demand for a popular athletic shoe is nearly constant at 600 pairs per week for
ID: 372023 • Letter: D
Question
Demand for a popular athletic shoe is nearly constant at 600 pairs per week for a regional division of a national retailer. The cost per pair is $50
. It costs $60 to place an order, and annual holding costs are charged at 10% of the cost per unit. The lead time is 8 weeks.one year has 52 weeks
a.
What is the EOQ?
b.
What is the reorder point?
c.
What is the cycle time?
d.
What is the total annual cost?
a.
What is the EOQ?
b.
What is the reorder point?
c.
What is the cycle time?
d.
What is the total annual cost?
Explanation / Answer
EOQ= (2xDXS)/H
Where
H= Holding cost
D= Annual Demand
S= Cost per order
D= Annual Demand= 600x52 = 31200
a) EOQ = (2xDXS)/H = (2x31200x60)/(10% of 50) = (2x31200x60)/(5) = 865.32 pairs
No. of orders done = Demand/EOQ = 31200/865.32= 36.05
c) cycle time = No. of working days per year / number of orders = 364/36.05=10.09 days
b) Reorder point = daily demand x lead time (days) = (31200/364)x(7X8)=4799.76 pairs
Reorder when inventory on hand = 4799.76 pairs
d) Total annual cost = Annual Holding cost + Annual ordering cost
Annual holding cost is (EOQ/2) x H = (865.32/2)x5 = 2163.3
Annual Ordering cost = No. of orders x order cost per order = 36.05x60=2163
So,Total annual cost = 2163.3+2163=4326.3
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.