Joe Henry\'s machine shop uses 2, 550 brackets during the course of a year. Thes
ID: 469029 • Letter: J
Question
Joe Henry's machine shop uses 2, 550 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the brackets: What is the EOQ? units (round your response to two decimal places). What is the average inventory if the EOQ is used? units (round your response to two decimal places). What would be the annual inventory holding cost? $ 191.62 (round your response to two decimal places). Given the EOQ, how many orders will be made annually? orders (round your response to two decimal places). What would be the annual order cost? (round your response to two decimal places). Given the EOQ, what is the total annual cost of managing (ordering and holding) the inventory? (round your response to two decimal places). What is the time between orders? days (round your response to two decimal places).Explanation / Answer
Annual demand(D) = 2550
Holding Cost (H) = $1.60
Ordering Cost (O) = $ 18
a) EOQ = Sqrt((2 * D* O) / H) = Sqrt(( 2 * 2550 * 18) / 1.60) = 239.53 units
b) Average Inventory = EOQ / 2 = 239.53 / 2 = 119.77 units
Annual Inventory Holding Cost = Average Inventory * Holding cost = 119.77 * 1.60 = $ 191.62
c) Number Of Order Made Annually = (Annual Demand / EOQ) = 2550 / 239.53 = 10.65 orders
Annual Order Cost = Number Of Order * Ordering Cost = 10.6458 * 18 = $ 191.63
d) Total Annual Cost = Annual holding Cost + Annual Ordering Cost = $191.62 + $191.63 = $383.25
e) time between order = Number of working days per year / number of orders = 250 / 10.65 = 23.47 days
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