An office supply store will begin stocking a new type of pen. Expected monthly d
ID: 2426113 • Letter: A
Question
An office supply store will begin stocking a new type of pen. Expected monthly demand is 800 units. The store is open 300 days a year. The supplier price schedule per pen is as follows: less than 200, $4.0; greater or equal to 200 and less than 400, $3.8; and greater or equal to 400, $3.6. Ordering cost is $40 and annual holding cost is $6 per pen. Round your answers to zero decimal digits.
The total cost function of this inventory problem is a:
The optimal order quantity for the pen is:
The optimal total annual inventory cost (including purchasing) is:
If the manager decides to make orders of 200 pens each time an order is made, the number of orders per year is:
If the manager decides to make orders of 200 pens each time an order is made, and the lead time to order the pens from the supplier is 2 days, then the reorder point should be:
Explanation / Answer
Answer: Optimal order quantity for the pen is:
EOQ=[2AO/C]1/2
=[(2*800*12 months*$40)/$6]1/2
=357.77 units
Answer: The optimal total annual inventory cost (including purchasing) is:
=Total annual holding cost+Total annual ordering cost+Purchase cost
=$1073.31+$1073.31+$1359.526=3506.146
Total annual holding cost=[(357.77/2)*$6]=$1073.31
Total annual ordering cost=(9600/357.77)*$40=$1073.31
Purchase cost=357.77*3.8=$1359.526
Answer:No of order per years=Annual demand/No of units in order
=9600/200=48 orders
Answer: Reorder point=200*2=400