Calculate the total annual cost using the eoq

Assignment Help Operation Management

Reference no: EM13234307

Differentiate between the following:

a. Perpetual inventory monitoring and periodic inventory monitoring

b. Pipeline inventory and buffer inventory

c. EOQ with usage and EOQ with price breaks

d. It is your responsibility, as the new head of the automotive section of Nichols Department Store, to ensure that reorder quantities for the various items have been correctly established-You decide to test one item and choose Michelin tires, XNV size 185 x 14 BSW. A perpetual inventory system has been used, so you examine this as well as other records and come up with the following data.

Cost per tire $35 each

Holding cost 20 % of tire cost per year

Demand 1,000 per year

Ordering cost $20 per order

Standard deviation of daily demand ; 3 tires

Delivery lead time 4 days

Bennse customers generally do not wait for tires but go elsewhere, you decide on a service probability of 98 percent. Assume the demand occurs 365 days per year.

i. Determine the economic order quantity

ii. Determine the reorder point

iii. Calculate the total annual cost using the EOQ

Reference no: EM13234307

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