Determine the optimal order quantity using basic eoq model

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Reference no: EM132236041

Aero Company distributes a major part for the F–35 fighter jets to the U.S. Air Force which they source from ABS Manufacturing. Due to the very high holding cost, the company wants to implement an EOQ model. The annual demand for the part is 81,000 and the company operates 300 days per year. The annual carrying cost rate is 10% of the unit cost and the unit cost of this item is $1,000. The ordering cost per order is estimated at $500. ABS Manufacturing has an average lead time 3 days.

Determine the optimal order quantity using the basic EOQ model.

How many orders will Aero Company need to submit to accommodate annual demand?

What is the length of order cycle between consecutive orders?

What is the reorder point for Aero Company?

What is the reorder point for Aero Company if they want to carry a safety stock of 100 units?

What is Aero Company’s total annual ordering and inventory carrying costs using the basic EOQ model with no backorders?

Reference no: EM132236041

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