The Talbot Company uses electrical assemblies to produce an array of small appli

Question

The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year 1. Use the information in the scenario above. What is the economic order quantity for the Xo-01? 2. How many times per year must Talbot order the XO-01 when orders are placed using the EOQ quantity? 3. Consider the following conditions for an item used in the Hess Company's manufacturing process: 80 units 100 units 20 units hand invento en orders (scheduled receipts ackorders What is Hess's inventory position for this item? Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. The lead time from the plant to the wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant 4. Refer to the scenario above. What is the total of thewholesaler's current cycle plus pip eline inventories?

Explanation / Answer

1) Annual demand, D = 8000

Order Cost, S = 50

Holding cost, H = 20

Economic order quantity, Q = SQRT(2DS/H) = SQRT(2*8000*50/20) = 200

2) Number of orders placed per year = D/Q = 8000/200 = 40

3) Hess inventory position for this item = on hand inventory + open orders - backorders

= 80+100-20

= 160

4) cycle plus pipeline inventory = 600/2+100*4 = 700

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