Clap Off Manufacturing uses 1,400 switch assemblies per week and then reorders a
ID: 2763996 • Letter: C
Question
Clap Off Manufacturing uses 1,400 switch assemblies per week and then reorders another 1,400. Assume the relevant carrying cost per switch assembly is $5.10 and the fixed order cost is $580. (Enter your answer as directed, but do not round intermediate calculations.)
Clap Off Manufacturing uses 1,400 switch assemblies per week and then reorders another 1,400. Assume the relevant carrying cost per switch assembly is $5.10 and the fixed order cost is $580. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
Given in the problem
Carrying cost per unit is $5.10
The fixed cost is $580
The inventory is 1400 units per week
Inventory for complete year is 52 weeks multiply 1400 units is 72800 units
The number of orders for whole year is 52 weeks as reorder is done on weekly basis
The carrying cost is basically the average inventory multiplied by the cost of carrying per unit
Carrying cost = (1400 /2) * $5.10
Carrying cost = $3,570
b) The restocking cost is order cost for number of orders times that is 52 weeks with the cost of order is $580
Restocking cost = 52 * 580
Restocking cost = $30,160
c) the economic order quantity is the determine the maximum units per order with minimum cost incurred . the formula to calculate the EOQ is
EOQ = SQRT(2 × Quantity × Cost Per Order / Carrying Cost Per Order)
Where
Sqrt = square root
Quantity = total inventory per year that is 72,800 units
Cost per order = $580
Carrying cost per order = $5.10
Putting values is formula
EOQ = sqrt ( 2 x 72800 x 580 /5.10)
Eoq = 4069.20
the economic order quantity is 4069.20 units
D) the number of orders per year will be the total units sold per year divided by eoq units
Number of orders = 72,800 / 4069.20
=17.89 times
the EOQ number of orders will be 17.89 times