Calculate annual product costs for each alternative

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Reference no: EM132183951

Ergonomics Inc. sells ergonomically designed office chairs. The company has the following information:

Average demand = 29 units per day

Average lead time = 36 days

Item unit cost = $56 for orders of less than 260 units

Item unit cost = $54 for orders of 260 units or more

Ordering cost = $31

Inventory carrying cost = 25%

The business year is 250 days

Assume there is no uncertainty at all about the demand or the lead time.

a. Calculate EOQ if unit cost is $56 and $54. (Note: These EOQs do not need to be feasible in their price range.) (Round up your answers to the next whole number.)

Unit cost at$56____Units

Unit cost at$54____Units

b. Calculate annual ordering costs for each alternative? (Round your answers to 2 decimal places.)

Unit cost at$56____

Unit cost at$54____

c. Calculate annual inventory carrying costs for each alternative? (Round your answers to 2 decimal places.)

Unit cost at$56____

Unit cost at$54____

d. Calculate annual product costs for each alternative?

Unit cost at$56____

Unit cost at$54____

e. What will be the total costs for each alternative? (Round your answers to 2 decimal places.)

Unit cost at$56____

Unit cost at$54____

f. Based on your analysis, how many chairs should they order at a time? (Round your answers to 2 decimal places.)

Order Quantity____Chairs

g. How much the firm can save annually by using the order quantity in Part f. instead of the first EOQ shown in Part a? (Round your answer to 2 decimal places.)

Amount saved_____

Reference no: EM132183951

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