Monica is the production manager of Score Company. Score produces soccer boots and purchases most of the
Question:
Monica is the production manager of Score Company. Score produces soccer boots and purchases most of the components of the boots from suppliers all around the world. Monica wants to minimise inventory costs and has therefore decided to use the Economic Order Quantity (EOQ) approach. The laces supplier has agreed to supply this specific order quantity. Score has been purchasing laces in lots of 900 units. Monica knows that the cost per unit of lace is $12, carrying/holding cost is $3 and ordering cost is $16 per order placed. Monica’s boss has asked her how much Score can save annually by buying laces in most economical quantities.
D.1. What is the most economical order size?
D.2. How many economic orders should Score place in a year, and how much doesthat cost (i.e. ordering costs)?
D.3. What is the average inventory size in case of using the EOQ approach, and how much does that cost (i.e. carrying costs)?
D.4. How much can Score spare annually by purchasing laces in most economical quantities?
Quantitative Analysis for Management
ISBN: 978-0132149112
11th Edition
Authors: Barry render, Ralph m. stair, Michael e. Hanna