What is the inventory level at the point of reordering

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Reference no: EM132241819

A company produces a product that requires turbine blades in its construction. The company plans on building 2500 units of the product over the next year, and therefore, has a need for 2500 units of turbine blades. The cost of placing an order for turbine blades is $15.00, and each unit costs $4.00 per year to carry in inventory. Each turbine blade has a cost of $300.00.

a. What is the Economic Order Quantity?

b. The company has the capability of producing turbine blades internally. It estimates a setup cost of $250.00 per production run. The production rate would be 4800 units of turbine blades per year, thereby reducing the cost of each blade by 20%. What is the Economic Production Lot Size?

c. Based on our cost calculations, should the company produce turbine blades internally or continue to purchase from outside sources? How much is saved as a result?

d. If the Lead-Time is 5 days, what is the inventory level at the point of reordering?

e. Determine the Cycle Time for the EOQ Model.

f. Determine the period of Pure Consumption per cycle for the EPLS Model.

g. What is the Maximum Inventory Level in each model?

Reference no: EM132241819

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