Exercise: EOQ

For all problems, round your answer to 2 digits after decimal unless otherwise specified.

Please write the steps that led you to your answer in detail. Full points will be given to those that provide the correct intermediary steps and the answers.

Q1

Consider an alcohol prep pads product that has an annual demand of 80,000 boxes. Fixed cost of ordering is $40 for this particular product, and the wholesale price is $2 per box. Annual inventory holding cost is 10% of the wholesale price. Then, what is the EOQ for this particular product? Please provide an integer number. (Note that EOQ should be in integers in this case, since you cannot order half a box of alcohol prep pads.)

Answer : __________________________

Q2(a)

An allergy products superstore sells 500 of their most popular model of air filters each month. The cost of ordering and receiving shipments is $20 per order. Accounting estimates that annual inventory holding cost is $6. The store operates 240 days per year (operating days). The supplier lead time is 2 operating days. Each order is received from the supplier in a single delivery. There are no quantity discounts.

What quantity should the store order with each order? Please provide an integer number.

Answer : __________________________

Q2(b)

How many times per year will the store order?

Answer : __________________________

Q3(a)

A mask manufacturer started a new production plant. The plant manager wishes to optimize the inventory costs of the companys best-selling mask. The annual demand for the mask is 12,000 and the plant works 240 days per yr. The plant can produce the mask at a rate of 100 masks per day. The cost to prepare the equipment to start a production run is $100 and the annual inventory carrying cost is $3.6 per year.

What should be the optimum quantity of masks to produce?

Answer : __________________________

Q3(b)

How many production runs are needed to meet the annual demand?

Answer : __________________________