Question

In: Operations Management

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

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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