Calculate the economic order quantity for the item

Assignment Help Operation Management
Reference no: EM131375683

The demand for a product is constant at 20 units a month. Each unit costs 100 TL. Last year the cost of running the company’s purchasing department (which sent out 2,000 orders) was 50,000 TL. Annual holding costs are 20% of unit cost for capital, 5% for storage space, 3% for deterioration and obsolescence and 2% for insurance. All other costs associated with stocking the item are combined into a fixed annual cost of 2,400 TL.

a) Calculate the economic order quantity for the item, the time between orders and the corresponding total cost.

b) By making the item itself the company could avoid the fixed cost of 2,400 TL a year. With a production rate of 40 units a month, each unit costs 75 TL and batch set-up costs are 1,000 TL. Would it be better for the company to make the item rather than buy it?

Reference no: EM131375683

Questions Cloud

Ratas continues to order in the optimum order quantity : The Ratas Company is using mainly teak lumber in the manufacture of outdoor furniture. They purchase teak lumber from a far away lumberjack in medium-to-large amounts and store it in their lumber yard near the factory. Each order placed to the lumber..
What is the percentage change in the price of each bond : A bond trader purchased each of the following bonds at a yield to maturity of 8 percent. Immediately after she purchased the bonds, interest rates fell to 7 percent. What is the percentage change in the price of each bond after the decline in inte..
Compare the experiences your colleagues shared : Compare the experiences your colleagues shared regarding divergent-thinking and convergent-thinking processes and how culture influenced them.
Calculate the economic order quantity for the item : The demand for a product is constant at 20 units a month. Each unit costs 100 TL. Last year the cost of running the company’s purchasing department (which sent out 2,000 orders) was 50,000 TL. All other costs associated with stocking the item are com..
Describe the steps in legislation development : Describe the steps in legislation development. Illustrate with an example of a dental public health program or project. (Choose a different DPH program than you have previously used for a paper or discussion.)
List some methods of searching for refrigerant leaks : Explain a method used to determine the correct operating discharge pressure of a commercial refrigeration system.
What are some potential problems : What are some potential problems that must be overcome when using multicultural, diverse teams in today's organizations? what are some recognized advantages? identify and discuss two of each.
What are the tradeoffs the new technology presents : This paper will focus on the history of technology as it relates to computer science and information technology. From the very general topics listed, choose one area that you are interested in researching. From within that area, select and narrow ..

Reviews

Write a Review

Operation Management Questions & Answers

  Most important elements of the general environment

Identify the three most important elements of the general environment that impact your organization. Identify the three most important elements of the industry environment that impact your organization. How do these environmental elements relate to t..

  How will this affect the receivables turnover ratio

A company has recently implemented an automated online billing and payment processing system for orders it ships to customers. As a result, it has reduced the average number of days between billing a customer and receiving payment by 10 days. How wil..

  How would you go about handling this task

Review the following scenario and discuss with your instructor and classmates the best approach to handling this office situation. You have noticed that Jill, the newly hired office receptionist, has been frequently misfiling patient charts. How woul..

  What is the optimal total annual inventory cost

Brady Jones is a manager at a local store that sells computers. He needs to decide how many computers to order based on the quantity discount schedule below. Annual demand is 3,000 computers, annual inventory carrying cost as a percent of unit cost i..

  Percentage improvement is needed in supply chain strategy

Han Lee Furniture, Inc, spends 45% of its sales dollars in the supply chain and finds its current profit of $30,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. What percentage im..

  Write down a 700- to 1050-word paper in which you describe

write a 700- to 1050-word paper in which you explain operation managements role in business today. include the

  What is the firms expected profit

Q in the above table is the optimal newsvendor quantity and "Expected Profit" is the news-vendor expected profit if Q is ordered. The firm will produce some parkas well in advance of the selling season. What is the firm's expected profit if every p..

  Presentation on supply chain

Do presentation on PowerPoint handling the subject of (Supply Chain in a thousand word), this will be presented in front of investors and the don't have the full pictures about this dept.

  Portfolio weights for a portfolio

What are the portfolio weights for a port folio that has 135 shares of Stock A that sell for $48 per share and 165 shares of Stock B that sell for $29 per share?

  Are any levels not useful when applying system safety

What levels of the hierarchy of controls are most applicable to system safety? Are any levels not useful when applying system safety? Provide one or more examples that support your response.

  Over what range of production is each location optimal

The fixed and variable costs for three potential manufacturing plant sites for a rattan chair weaver are shown: Over what range of production is each location optimal

  Assume poisson arrivals and exponential service times

Students arrive at the Administrative Services Office at an average of one every 25 minutes, and their requests take on average 15 minutes to be processed. The service counter is staffed by only one clerk, Judy Gumshoes, who works eight hours per day..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd