Mike Brauer uses 4,000 per year of a certain subassembly that has an annual hold
ID: 454279 • Letter: M
Question
Mike Brauer uses 4,000 per year of a certain subassembly that has an annual holding cost of $0.10 per unit. Each order placed costs Mike $2.00. Mike Operates 200 dates per year and has found that an order must be placed with his supplier 3 working days before he can reveive that order. For this subassembly, find (a) the economic order quantity. (b) the average inventory level. (c) the optimal number of orders per year. (d) the optimal number of days between 2 orders. (e) the total annual cost (carrying cost + ordering cost). (f) the reorder point
Explanation / Answer
Number of Working days per year (n) 200 Annual Demand (D) 4000 Lead Time (L) 3 Ordering Cost (O) 2 Annual Holding Cost (H) 0.1 (a) Economic Order Qty (Q) 400 EOQ =(2*D*O/H) (b) Average Inventory Level = Q/2 200 (c) Number of Orders per year (N) = D/Q 10 (d) Cycle Time (number of days between two orders) = n/N 20 Inventory Holding Cost (HC) = H*Q/2 20 Annual Ordering Cost (OC) = O*N 20 (e) Total Annual Inventory mgmt Cost =HC+OC 40 (f) The Reorder point = D*L/n 60