Solution-Calculate the total cost based on the EOQ

Calculate the total cost based on the EOQ

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Reference no: EM133012104

Question - A company is in the art of making waist beads. It requires 0.02 Kilograms of colored beads and the company produces and sells 800,000 units of waist beads annually. The cost to place a single order is $30 per hour and the annual carrying cost inventory is 2.2% of the cost of the colored beads per annum. The normal time to place an individual order is 4 hours. Currently the company orders 8 ties per year.

The main supplier of the colored beads advised the financial controller that 5% discount would be given if the entity doubles its current lot size. He also informed that a further 5% would be given if entity increased its order by 4000kg above the current size. The material is currently bought from its supplier for $60 per kilogram.

Required -

-Calculate the Economic Order quantity.

-Calculate the total cost based on the EOQ.

-Calculate the total cost for each individual alternate order quantity, including current policy.

-What is the optimal order quantity and why?

-State 3 assumptions of EOQ.

Reference no: EM133012104

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Calculate the total cost based on the EOQ

Reference no: EM133012104

Reference no: EM133012104

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