Question

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Using the appropriate model (EOQ or EPQ) answer the following questions: (10 points) a) In the basic EOQ model, if the cost of placing an order is reduced by half, and all other values remain constant, will the EOQ value increase or decrease and by what percentage? (2 points) b) A product whose EOQ is 100 units experiences an increase in ordering cost from $10 per order to $40 per order. The revised EOQ is? (2 points) c) A product has a demand of 4000 units per year. Ordering cost is $40, and holding cost is $4 per unit per year. The lead-time is doubling from 2 days to 4 days, what is the impact to the economic order quantity? Why? (2 points) d) A production order quantity problem has a daily demand rate = 25 and a daily production rate = 100. The production order quantity for this problem is 500 units. What is the average inventory for this problem? (2 points) e) The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair that costs $500. The holding cost per unit per year is 25% of the item cost, annual demand is 6000 units, and the ordering cost is $80 per order. The lead time is normally distributed and on average takes 12 days with a standard deviation of 2 day. Because demand is variable (standard deviation of daily demand is 5 chairs), PCE has decided to establish a customer service level of 90% (Z=1.28). The store is open 300 days per year. What is the reorder point? (2 points)

Answer 1