Your company purchases parts from the supplier and you will need 1000
Ask Expert

  • Your study cart is empty!

Be Prepared For The Toughest Questions

Practice Problems

Your company purchases parts from the supplier and you will need 1000

Question 5

Your company purchases parts from the supplier and you will need 1000 parts per month. Ordering costs are £25 per order, and the unit cost is £2.50. Annual holding costs are charged at 20% of the unit purchase cost (per component). There are 250 working days per year and the lead time is 5 days.

a. What is the EOQ and reorder point for this component?

b. What are the total holding and ordering costs associated with your recommended EOQ?

c. In the EOQ model, does the optimal order quantity increase or decrease if the demand rate is increased? If the order cost is increased? If the unit holding cost is increased? In each case, what is the intuitive explanation?

Hint
ManagementEconomic order quantity (EOQ) is the ideal order quantity that a company needs to purchase to minimize the inventory costs like shortage costs, holding costs and also order costs. It is also the optimal order quantity of a company which mainly minimizes the total costs that are related to the receiving, ordering, and also holding the inventory. Also, it's formula is best applied in the s...
Related questions

Know the process

Students succeed in their courses by connecting and communicating with
an expert until they receive help on their questions

1
img

Submit Question

Post project within your desired price and deadline.

2
img

Tutor Is Assigned

A quality expert with the ability to solve your project will be assigned.

3
img

Receive Help

Check order history for updates. An email as a notification will be sent.

img
Unable to find what you’re looking for?

Consult our trusted tutors.

Ask a Question

Developed by Versioning Solutions.