Reference no: EM132746539

Sims Hardware sells wood pellets used in heating stoves and slow-cook grills. The supplier for the pellets pays all incoming freight. Following is detailed data collected regarding pellet inventory needs:

Annual demand for wood pellets 65,000 lbs.
Ordering cost per purchase order $120
Carrying cost per year 15% of purchase costs
Safety-stock requirements none
Cost of wood pellets $4 per 40 lb bag

The purchasing lead time is three weeks. Sims Hardware is open 240 days a year (48 weeks for 5 days a week).

Required:

Problem 1: Calculate the EOQ for wood pellets.

Problem 2: Calculate the number of orders that will be placed each year.

Problem 3: Calculate the reorder point for wood pellets.