a) What is the economic order quantity?b) Find the annual holding costs.c) Find the annual ordering costs.d) What is the reorder point? Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,000 units.Southeastern estimates its annual holding cost for this item to be $24 per unit. The cost to place and process an order from the supplier is $73. The company operates300 days per year, and the lead time receive an order from the supplier is 3 working days.

The goal of the EOQ formula is to identify the optimal number of product units to order. If…

Answered: What is the economic order quantity?

Business

Operations Management

What is the economic order quantity?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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YOZECH Enterprise is frequently losing sales due to stock-outs. To avoid this problem, the owner likes to implement a new system of maintaining an inventory level which will include a safety stock. After looking into the past records of the company, it was determined that the normal usage during the lead time of 12 days is 120 units while the maximum usage is 150 units for 15 days. Based on the given information, what should be the safety stock of YOZECH Enterprise? What is the ROP (Re-order point)?
GameStop has maintained 75% service level for inventory of PlayStation 5. Mean demand during lead time is 166 PlayStations, and the standard deviation during lead time is 58 PlayStations. The annual cost of carrying one PlayStation in inventory is $12. The store’s operations analyst recently told GameStop's management that they could expect a $550 improvement in profit (based on current figures of cost per PlayStation) if the service level were increased to 97.5%. Is it worthwhile for GameStop to make this change?
The TransCanada Lumber Company and Mill processes 10,000 logs annually, operating 250 days per year. Imme-diately upon receiving an order, the logging company’s supplier begins delivery to the lumber mill at the rate of 60 logs per day. The lumber mill has determined that the or-dering cost is $1600 per order, and the cost of carrying logs in inventory before they are processed is $15 per log on anannual basis. Determine the following:a. The optimal order sizeb. The total inventory cost associated with the optimalorder quantityc. The number of operating days between ordersd. The number of operating days required to receive anorder
Morning Glory buys cereal directly from the manufacturer for $20 per case. The company’s annual demand for cereal is 200,000 cases and the company believes that the demand is constant for each of the 250 days per year that it is open for business. Average lead time from the supplier for new orders is a constant 8 days. The purchasing agent at Morning Glory estimates the annual inventory carrying cost is 10% and it costs approximately $40 to prepare, send, and receive an order. A. if economic order quantity is 2828 B. average inventory be based 2828 is 1414 What is the reorder point based on the answer to (a)? Morning Glory discovered if it orders 10,000+ cases each time, it can obtain a $2 price break per case from the supplier. What order quantity should Morning Glory place based on this information?
Golden Crust Bakery buys flour in 25-pound bags. The bakery uses an average of 1,215 bags a year. Preparing an order and receiving a shipment of flour involves a cost of $10 per order. Annual holding costs are $75 per bag. Once an order for flour is placed, it takes six (6) days to receive the order from the flour factory. The bakery operates 350 days per year. Calculate the following: Economic Order Quantity Expected number of orders (Order Frequency) Average inventory The annual holding cost The annual ordering cost The total annual cost of inventory management Reorder point If holding costs were to increase by $9 per year, how much would that affect the minimum total annual cost?
Legu Bloxs – specialized in the manufacturing of high-rise CHB (concrete hollow blocks). The company makes a yearly order for 2,400 sacks of cement at a unit price of 250.00. Its carrying cost per year is estimated at 5% of the price of concrete block. While the cost of preparing a requisition, a purchase order and receiving tickets, stocking the items when they arrive m processing the supplier’s invoice and remitting the payment to the supplier is 150 per order per year. What is the Total Inventory Cost?
Legu Bloxs – specialized in the manufacturing of high-rise CHB (concrete hollow blocks). The company makes a yearly order for 2,400 sacks of cement at a unit price of 250.00. Its carrying cost per year is estimated at 5% of the price of concrete block. While the cost of preparing a requisition, a purchase order and receiving tickets, stocking the items when they arrive m processing the supplier’s invoice and remitting the payment to the supplier is 150 per order per year. What is the economic order quantity? What is the Total Inventory Cost? How many orders should be made each year?
Wholemark is an Internet order business that sells one popular New Year's greeting card. The cost of the paper on which the card is printed is $0.10 per card, and the cost of printing is $0.42 per card. The company receives $2.40 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Based on past data, the number of customers from Los Angeles is normally distributed with a mean of 2,500 and a standard deviation of 600. What is the optimal production quantity for the card for Los Angeles, if Wholemark only makes a one-time production for this area? Round to the nearest integer.
A sporting goods company has a distribution center that maintains inventory of fishing rods. The fishing rods have the following demand, lead time, and cost characteristics: Average demand = 130 units per day, with a standard deviation of 12 units Average lead time = 12 days with a standard deviation of 1 day 250 days per year in the business year Unit cost = $28 Desired service level = 97.5% Ordering cost $53 Inventory carrying cost = 25% a. What is the standard deviation of demand during lead time? b. How many fishing rods should the distribution center carry to provide the desired service level? c. What is the EOQ? d. What is the average cycle stock?
RoyalTech's South Jersey warehouse faces a daily demand that is normally distributed, with mean 1,000 and standard deviation 100 pallets. RoyalTech's supplier has a lead-time that is normally distributed, with mean 5 days and standard deviation 1 day. RoyalTech reviews its inventory periodically, that is, every 7 days. (Hint: think about the inventory model appropriate here) RoyalTech's warehouse runs 365 days a year, and the cost of carrying inventory is 18.25% per year. The supplier charges RoyalTech $2,000 per pallet, and $5,000 per delivery. RoyalTech plans to maintain 98% SL. NORMSINV(0.98) = 2.054. L(2.054) = 0.0073. Answer the following questions. 1. How much safety stock should Royal Tech carry? [Select] v pallets. 2. What is RoyalTech's average inventory? [ Select ] pallets. 3. What is the total relevant cost incurred by RoyalTech per day? $ [ Select] 4. What is the Fill Rate that RoyalTech is able to achieve for this service level? [ Select ]
Merlita works for a local ceramics company. She just completed her accountancy degree and learned the EOQ model in one of her subjects. She suggested to her employer to adopt it. The company sells 20,000 pieces of specialty ceramic items each year. Traditionally, they have produced these items four times a year, making 5,000 pieces at a time. They carry no safety stock as customers do not mind waiting for orders. The average piece of ceramic items costs P400 to make and costs the company P20 to carry in inventory for a year. The set up costs for each production run total P80. The company should a. Continue the existing system due to P38,950 advantage. b. Adopt EOQ due to savings of P35,675. c. Adopt EOQ due to savings of P42,320. d. Continue the existing system due to P41,820 advantage.
6-30 After analyzing the costs of various options for obtaining brackets, Ross White (see Problems 6-27 through 6-29) recognizes that although he knows that the lead time is 2 days and the demand per day averages 10 units, the demand during the lead time often varies. Ross has kept very careful records and has determined that lead time demand is normally distributed with a standard deviation of 1.5 units. (a) What Z value would be appropriate for a 98% service level? (b) What safety stock should Ross maintain if he wants a 98% service level? (c) What is the adjusted ROP for the brackets? (d) What is the annual holding cost for the safety stock if the annual holding cost per unit is $1.50? I'm stuck on c and d