10. This is skill-building exercise. You should provide formulas, steps, or reas
ID: 409971 • Letter: 1
Question
10. This is skill-building exercise. You should provide formulas, steps, or reasons to support your solutions. You Must show how did you reach every number. Submissions with only the fnal solutions will not be given any credit. An automaker buys a certain part to assemble the transmission. The supplier charges a price of $8 per part for quantities of 600 part or more, $9 per part for orders of 400 to 599 parts, and $10 per part for lesser quantities. The automaker operates 200 days per year. The automaker needs 25 parts per day, and ordering costs are $48. Holding costs are $2 per year for each part, What is the order quantity that will minimize total annual cost Path:Explanation / Answer
Annual Demand (D) =25 per day * 200 = 5000 Units.
200 are the days of operation in a year.
Ordering Cost (S) = $48
Holding Cost (H) = $2
So Economic Order Q1uantity = (2DS)/H
=(2*5000*48)/2
=24000
=489.89
=490 units will minimize the total annual cost.
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