Dtermine the minimum total annual cost ordering holding

Assignment Help Operation Management

Reference no: EM13391068

A company stocks a component that costs $20 per unit. Annual usage of this item is expected to be 3120 units. The firm is open for business 52 weeks per year, so weekly demand is 60 units per week, with a standard deviation of 30 units. The firm's cost accountants have estimated that it costs $60 every time an order is placed for more components, and that carrying the item in inventory costs about $10 per unit per year. Past experience with their supplier indicates that the time from ordering more items to receipt of the shipment of those items is 21 days (assume they are open 7 days per week).

a. What quantity should be ordered each time? (Assume that the EOQ assumptions apply.)

b. What is the minimum total annual cost (ordering + holding + purchase) for managing this inventory item?

c. If the company decided that their JIT program required frequent small orders and deliveries (assume that this would mean ordering a quantity of 17 units every other day, instead of the EOQ quantity on a less frequent basis), and the costs remain the same as described above, how much higher would the total annual cost be for this item?

d. If a 90% service level is required, what reorder point should be used?

Reference no: EM13391068

Questions Cloud

Point out the possible cost and benefit to united states : the economic union was formed in 1957 by west germany france italy belgium the netherlands and luxembourg. today 27

Fr this project you will analyze a business case and make : for this project you will analyze a business case and make recommendations based on the outcome of your analysis. the

Analyze integrated marketing communications and its : for this assignment you will include part a of your marketing plan which has addressed the feedback from your

Daw budget constraint showing trade-off between lifetime : consider a couples decision about how many children to have. assume that over a lifetime a couple has 200000 hours of

Dtermine the minimum total annual cost ordering holding : a company stocks a component that costs 20 per unit. annual usage of this item is expected to be 3120 units. the firm

When brett reported net income of 780000 what was the : rojas co. owned 7000 shares 70 of the outstanding 10 100 par preferred stock and 60 of the outstanding common stock of

Compute what happens to income of workers and orchard : the nation of ectenia has 20 competitive apple orchards which sell apples at the world price of 2. the following

The elements needed for successful implementation of the : the elements required for successful implementation of the jitlean philosophy include reducing setup times performing

Many argue that the single largest variable in : many argue that the single largest variable in organizational success is leadership. effective leadership can transform

User Account

All Pages