Joe Henrys machine shop uses 2,500 brackets during the course of a year. These brackets are purchased
Question:
Joe Henry’s machine shop uses 2,500 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:
Annual demand: ...........2,500
Holding cost per bracket per year: ....$1.50
Order cost per order: ..........$18.75
Lead time: ...............2 days
Working days per year: .........250
(a) Given the above information, what would be the economic order quantity (EOQ)?
(b) Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?
(c) Given the EOQ, how many orders would be made each year? What would be the annual order cost?
(d) Given the EOQ, what is the total annual cost of managing the inventory?
(e) What is the time between orders?
(f) What is the reorder point (ROP)?
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...
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