Clap Off Manufacturing uses 1,700 switch assemblies per week and then reorders a
ID: 2710925 • Letter: C
Question
Clap Off Manufacturing uses 1,700 switch assemblies per week and then reorders another 1,700. Assume the relevant carrying cost per switch assembly is $5.40 and the fixed order cost is $595. (Enter your answer as directed, but do not round intermediate calculations.) Required: (a) Calculate the carrying costs. Carrying costs $ (b) Calculate the restocking costs. Restocking costs $ (c) Calculate the economic order quantity. (Round your answer to 2 decimal places (e.g., 32.16).) Economic order quantity (d) Calculate the EOQ number of orders per year. (Round your answer to 2 decimal places (e.g., 32.16).) Number of orders per year
Explanation / Answer
(a) Annual carrying costs = (Annual demand / 2) * carrying cost per switch
= (52 * 1,700 / 2) * $5.40
= $238,680.00
(b) Restocking costs = Fixed cost per oder * No. of orders per year
= $595 * 52
= $30,940.00
(c) Economic order quantity (EOQ) = sqrt(2 * Annual demand * fixed order cost / carrying cost per switch)
= sqrt(2 * 52 * 1,700 * $595 / $5.40)
= 4,413.70 ~ 4,414
(d) EOQ No. of orders per year = Annual demand / EOQ
= 52 * 1,700 / 4,414
= 20.02 ~ 20