Question

Turfpro Company produces lawn mowers and purchases 4,500 units of a rotor blade part each year at a cost of $ 30 per unit. Turfpro requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, etc.) is $ 3 per unit per year. The relevant ordering cost per purchase order is $ 75.

Required
1. Calculate Turfpro’s EOQ for the rotor blade part.
2. Calculate Turfpro’s annual relevant ordering costs for the EOQ calculated in requirement 1.
3. Calculate Turfpro’s annual relevant carrying costs for the EOQ calculated in requirement 1.
4. Assume that demand is uniform throughout the year and known with certainty so there is no need for safety stocks. The purchase-order lead time is half a month. Calculate Turfpro’s reorder point for the rotor blade part.



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  • CreatedMay 14, 2014
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