Question

02olto pnoincrease the chance of receiving quantity discounts Y 199 29010T b Martin Limited uses 625 units of a part each year. The cost of placing one order is $8; the cost of carrying one unit in inventory for a year is $4. 02: 21(00) uunsup 1e roño 9om 9. (O0 Martin has decided to begin ordering 40 units at a time. What is the average annual carrying cost of Martin's new policy? A. a (O ginsup onmonos r $80 02S $60 В. C. 21 1209 bl-1o l$160 D. E. $90 Martin has decided to begin ordering 40 units at a time. What is the average 10. atinu 02 215bio batrmid annual ordering cost of Martin's new poliev? А. В. 0OF 20IGUIGU $190 $150 sbi0 Sthiotoss С. $125 D E. $100 $145 11. What is the EOQ for Martin? bomb-yiotnin100 А. В. OW 50 dmur С. 45

Answer 1

9.Martin decided top order 40 units at time

So at any time more than 40 units are not there

So annual average carrying cost = 40 * $4(cost of carrying one unit of inventory)

= $160

So option c is right

10.Martin decided to order 40 units at a time

so number of order required per year = Annual demand/ Unit of one order

= 625/40

= 15.625

Annual ordering cost of martin's new policy = No of order * cost of placing one order

= 15.625 * $8

= $125

So option c is right.

11. Cost of Placing 1 Order (S) = $8

Cost of carrying one unit of inventory (H) = $4

Q =$\sqrt{}$ 2DS/H

Q = $\sqrt{}$ 2*625*8/4

Q = $\sqrt{}$ 10000/4

Q= $\sqrt{}$ 2500

= 50 EOQ

So Option B is right.