1. Tew Electric Company sells 500,000 standard wall switches a year. Each switch costs the company $2.0. The percentage cost of carrying the switch is 20% of inventory value. The company can order these switches from either of two competing manufacturers. Manufacturer A delivers in 3 days and
2. requires a fixed ordering cost of $100 per order. Manufacturer B which would require a fixed ordering cost of $75 per order, takes 5 days to deliver. To begin the analysis, assume that no safety stock is carried.
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4. Required
5. a. Calculate Tew's EOQ for wall switches for both suppliers.
6. b. How many orders a year must be placed with each supplier, assuming that only one supplier is used?
7. c. What are the reorder point levels for ordering from each supplier?
8. d. Considering only inventory costs, should the firm order its wall switches from A or B?
9. e. Assume that the firm chose Manufacturer B as its wall switch supplier. Tew has been offered a I percent discount if it orders 20,000 units or more at a time. Should the firm increase the ordering quantity to 20,000 units and take the discount?

Answer rating: 100% (QA)

To solve this problem we will use the Economic Order Quantity EOQ model The EOQ helps us determine the optimal order quantity that minimizes the total ... View the full answer