Mayer, Inc. predicts it will use 63,000 units of material during the year. The expected daily usage is 500 units, and there is an expected lead time of five days and the desired safety stock of 1,500 units. The material is expected to cost $5 per unit. Mayer anticipates it will cost $194.45 to place each order. The annual carrying cost is $.50 per unit. Required: Compute the order point. Determine the most economical order quantity by use of the EOQ formula (round to the nearest whole unit). Calculate the total cost of ordering and carrying at the EOQ point.
1 | Order Point | (500*5)+1500 |
Order Point | 4,000 | |
2 | Most economical order quantity | |
EOQ = under-root of { (2*A*O) / C } | ||
EOQ = under-root of { (2 * 63000 * 194.45) / 0.50 } | ||
(2*63000*194.45)/0.5 | ||
EOQ = under-root of 49,001,400 | ||
EOQ | SQRT((2*63000*194.45)/0.5) | |
EOQ | 7,000 | |
3 | Total cost of ordering and carrying at the EOQ point | |
OC + CC = under-root of (2 * A * O * C) | ||
Total OC & CC = under-root of (2 * 63000 * 194.45 * 0.50) | ||
Total OC & CC | SQRT(2*63000*194.45*0.5) | |
Total OC & CC | 3,500 | |
Verification | ||
CC (1/2*7000*0.5) | 1,750 | |
OC (63000/7000*194.45) | 1,750 | |
Total OC & CC | 3,500 |
Mayer, Inc. predicts it will use 63,000 units of material during the year. The expected daily...
3. Calculate the total cost of Orueng all calling utullu P2-2 Economic Order Quantity; Ordering and Carrying Costs LO1 Mayer, Inc. predicts it will use 63,000 units of material during the year. The expected daily usage is 500 units, and there is an expected lead time of five days and a desired safety stock of 1,500 units. The material is expected to cost $5 per unit. Mayer anticipates it will cost $194.45 to place each order. The annual carrying cost...
EOQ, reorder point, and safety stock Alexis Company uses 631 units of a product per year on a continuous basis. The product has a fixed cost of $41 per order, and its carrying cost is $4 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note:...
EOQ, reorder point, and safety stock Alexis Company uses 805 units of a product per year on a continuous basis. The product has a fixed cost of $50 per order, and its carrying cost is $4 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note:...
Alexis Company uses 881 units of a product per year on a continuous basis. The product has a fixed cost of $45 per order, and carrying cost is $4 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ in units b. Determine the average level of inventory. (Note: Use a 365-day year to...
EOQ, reorder point, and safety stock Alexis Company uses 907 units of a product per year on a continuous basis. The product has a fixed cost of $57 per order, and its carrying cost is $5 per unit per year It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 days' usage in inventory as a safety stock. a. Calculate the EOQ. b. Determine the average level of inventory. (Note:...
Problem 13-28 Regional Supermarket is open 350 days per year. Daily use of cash register tape averages 17 rolls. Usage appears normally distributed with a standard deviation of 4 rolls per day. The cost of ordering tape is $1.00, and carrying costs are 44 cents per roll a year. Lead time is 4 days Use Table1 and Table?. a. What is the EOQ? (Round your answer to the nearest whole number.) b. What ROP will provide a lead time service...
E15-3 Mama Leone's Frozen Pizzas uses 50,000 units of cheese per year. Each unit costs $2.50. The ordering cost for the cheese is $250 per order, and its carrying cost is $0.50 per unit per year. Calculate the firm's economic order quantity (EOQ) for the cheese. Mama Leone's operates 250 days per year and maintains a minimum inventory level of 2 days' worth of cheese as a safety stock. If the lead time to receive orders of cheese is 3...
Hats R Cool, Inc. manufactures specialty hats which require a variety of materials (denim, ribbon, and mesh). Calculate the order point per material based on the following information: a) The company has an expected daily usage of 75 yards of denim and mesh (each). The supplier requires a 3 day lead time for orders. The mandatory safety stock is 175 yards for denim and 200 yards for mesh. b) The company has an expected daily usage of 20 yards of...
Alexis Company uses 800 units of product per year on a continuous basis. The product has a fixed cost of $50 per order, and its carrying cost is $2 per unit per year. It takes 5 days to receive a shipment after an order is placed, and the firm wishes to hold 10 day’s usage in inventory as safety stock. a. Calculate the EOQ b. Determine the average level of inventory (Note: Use a 365-day year to calculate day usage)...
(Comprehensive EOQ calculations) Knutson Products Inc. is involved in the production of airplane parts and has the following inventory, carrying, and storage costs: 1. Orders must be placed in round lots of 100 units. 2. Annual unit usage is 300,000. (Assume a 50-week year in your calculations.) 3. The carrying cost is 30 percent of the purchase price. 4. The purchase price is $30 per unit. 5. The ordering cost is $500 per order. 6. The desired safety stock is...