How do you get these answers? Thanks Pam runs a mail-order business for gym equi
ID: 422480 • Letter: H
Question
How do you get these answers? Thanks
Pam runs a mail-order business for gym equipment. Annual demand for TricoFlexers is 14,000. The annual holding cost per unit is $3.75, and the cost to place an order is $65. a. What is the economic order quantity? The EOQ is 697 . Enter your response rounded to the nearest whole number) b. Suppose demand for TricoFlexers doubles, to 28,000. The EOQ for the new value of demand is 985. (Enter your response rounded to the nearest whole number.) Does the EOQ also double? O A. No, the EOQ does not double as the annual demand doubles. The EOQ is inversely proportional to the demand O B. Yes, the EOQ doubles because the EOQ is directly proportional to the demand. ?? No the EOQ does not double as he annual demand doubles. The E0Q ncreases by the saare roo o the pro ct o m mes e demand meso e ng cost, divided by holding cost. No, the EOQ does not double as the annual demand doubles. The EOQ is inversely proportional to the square-root of the demand 0 D. c. The manufacturer of TricoFlexers has agreed to offer Pam a price discount of $3 per unit ($62 rather than $65) if she buys 2,900. Assuming that annual demand is still 14,000, how many units should Pam order at a time? Pam should order 2,900 units at a time. (Enter your response rounded to the nearest whole number.) Question is complete. Tap on the red indicators to see incorrect answers.Explanation / Answer
Annual demand, D = 14000
Holding cost, H = 3.75
Order cost, S = 65
a) EOQ = SQRT(2DS/H) = SQRT(2*14000*65/3.75) = 697
b) EOQ for new value of demand = SQRT(2*28000*65/3.75) = 985
c) New EOQ = 697*SQRT(2) = 697*1.414 = 985
No, the EOQ does not double as the demand doubles. The EOQ increases by the square-root of the product of two-times the demand times ordering cost divided by holding cost.
d) Total annual cost of EOQ order policy = Ordering cost + Holding cost + Cost of TricFlexers = (D/Q)*S + (Q/2)*H = (14000/697)*65 + (697/2)*3.75 + 14000*65 = $ 912,612
Total annual cost of discount policy = (14000/2900)*65 + (2900/2)*3.75 + 14000*62 = 873,751
Total annual cost of discount policy is lower. Therefore,
Pam should order 2,900 units at a time.
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