Demand for a product is 3200 TL units per quarter. Each orderhas a fixed cost...

Demand for a product is 3200 TL units per quarter. Each order has a fixed cost of 2500 TL. Annual holding cost per product is 80 TL.

Calculate: a) number of products that the company should order

b) average inventory

c) number of orders per year

d) expected time between orders

e) total relevant cost

Solutions

Expert Solution

Quarterly Demand = 3200

Annual Demand = D = 3200 * 4 = 12800 units

Order cost = S = 2500

Annual Holding cost = H = 80

a) Number of products that the company should order = EOQ = = = 894.43 units

b) Average inventory = EOQ / 2 = 894.43 / 2 = 447.21 units

c) Number of orders per year = D / EOQ = 12800 / 894.43 = 14.31 orders

d) Expected time between orders = 12 months / No. of orders per year = 12 / 14.31 = 0.84 months

e) Total relevant cost = Ordering Cost + Annual Holding cost = No. of orders * S + Average Inventory * H = 14.31 * 2500 + 447.21 * 80 = 35,775‬ + 35,776.8‬ = $71,551.8

keosha answered 2 years ago

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