Suppose that you are the manager of a production department that uses 2400 boxes of rivets per
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Question:
- Suppose that you are the manager of a production department that uses 2400 boxes of rivets per year. The supplier quotes you a price of $9.50 per box for an order size of 199 boxes or less, a price of $9.00 per box for orders of 200 to 499 boxes, and a price of $8.00 per box for an order of 500 or more boxes. You assign a holding cost of h=20 percent of the price to this inventory. What order quantity would you use if the objective is to minimize the total annual costs of holding, purchasing, and ordering? Assume the ordering cost is $60/order.What is your new EOQ and the annual total cost? Use the Table like we did in class (see below). Show all calculations.
Qty. Range | C=Cost/unit | H= h*C | Range EOQ | EOQ feasible? | Candidate EOQ |
Total Cost Calculation for each Candidate EOQ (show these below here):
What is the time between orders (months) for your order size?
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