JeeJam & Sons LLC expects an annual demand of 30,000 units, purchased for $6.00 from its supplier. There is currently no lead time for orders and each order will cost $170 regardless of quantity. The annual holding cost is estimated at $1.65 per unit. JeeJam & Sons LLC is able to get discounted prices based on the quanities purchased. A 1.5% discount is available on orders of at least 4,000 units and a 1.85% discount is available if the order quantity is 7,500 units or above.

Required: (a) Using the information provided by Charm Co, (i) Caculate the economic order quantity (EOQ) - ignoring the discount. (4 mark)

(ii) Determine whether higher quantities should be purchased to gain the discounts available. (12 marks)

(iii) Assuming Charm Co adopts the EOQ obtained in

(i), and that it takes 2 weeks for the order to be delivered, how frequently will the company place an order? (4 marks) (20 marks)

Answer rating: 100% (QA)

JeeJam Sons LLC Inventory Analysis a Economic Order Quantity EOQ without Discounts i Calculation We can use the EOQ formula to calculate the optimal o... View the full answer