Victor Pimentel uses 900 units per year of a certain subassembly that has an annual holding...

Victor Pimentel uses 900 units per year of a certain subassembly that has an annual holding cost of $80 per unit. Each order placed costs Victor $90. He operates 300 days per year and has found that an order must be placed with his supplier 4 working days before he can expect to receive that order

a) The economic order quantity is ___units (round your response to the nearest whole number).

b) The annual holding cost is ___(round your response to the nearest whole number).

c) The annual ordering cost is ___(round your response to the nearest whole number).

d) The reorder point is ___units (round your response to the nearest whole number).

Expert Solution

DEMAND = 900
ORDERING COST = 90
HOLDING COST = 80

1. EOQ = SQRT(2 * DEMAND * ORDERING COST / HOLDING COST) = SQRT(2 * 900 * 90 / 80) = 45

2. ANNUAL HOLDING COST = (EOQ / 2) * HOLDING COST = (45 / 2) * 80 = 1800

3. ANNUAL ORDERING COST = (DEMAND / EOQ) * ORDERING COST = (900 / 45) * 90 = 1800

4. ROP = DAILY DEMAND * LEAD TIME
DAILY DEMAND = DEMAND / NO. OF WORKING DAYS = 900 / 300 = 3

REORDER POINT = DAILY DEMAND * LEAD TIME = 3 * 4 = 12

keosha answered 3 years ago

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