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A company has estimated net requirements for a particular part as follows: Month 1 2 3...

A company has estimated net requirements for a particular part as follows:

Month

1

2

3

4

5

6

7

8

9

10

11

12

Requirements

100

10

15

20

70

250

250

250

250

40

0

100

Ordering cost associated with this part is $300. Estimated inventory carrying cost is $2 per unit per month calculated on average inventory. Currently no parts are available in inventory. The company wishes to know when and how much to order over the next 12 months.

(a) Apply the economic order quantity and the part period balancing procedures to solve this problem.

(b) What important assumptions are involved in each of the approaches used in part a?

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Answer #1

Apply EOQ fomula ✓2AO/C

O=ordering cost per order

A=annual consumption

C=Carrying cost p.u p.a

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