Question

Question 2 Not yet answered Smith LLC has an annual demand of 1400 high-grade networking hubs. The cost for each hub to Smith is $400. Carrying cost is estimated to be 17% of the unit cost, and the ordering cost is $25 per order. Marked out of 1.00 What is the EOQ? Round your answer to 2 decimals. P Flag question Answer: Question 3 Not yet answered What is the total cost of ownership (including annual holding and ordering costs, plus cost of goods sold) for Derrius Smith, the owner? Round your answer to 2 decimals. Marked out of 1.00 Answer: P Flag question Question 4 Not yet If Derrius orders in quantities of 300 or more, he can get a 5% discount on the cost of hubs. What is his new total cost of ownership? Round your answer to 2 decimals. answered Marked out of 1.00 Answer: P Flag question

Answer 1

Annual Demand, D = 1400 hubs

Cost of each hub = 400

Carrying cost, H = 17% of unit cost = 400*17% = 68

Ordering cost, S = 25/order

EOQ = $\sqrt{}$ (2DS/H) =$\sqrt{}$(2*1400*25/68) = 32.08445 rounded to 32.08

Total Cost = Total Annual Ordering Cost+ Total Annual Holding/Carrying Cost+ Total cost of goods sold

Total Annual Ordering Cost = Order Frequency*Order Cost = (D/EOQ)*S = (1400/32.08445)*25 = 1090.871

Total Annual Carrying/Holding Cost = Average inventory*Carrying Cost = (EOQ/2)*H = (32.08445/2)*68 = 1090.871

Total cost of goods sold = D*Cost price = 1400*400 = 560000

Total Cost of ownership = 560000+1090.871+1090.871 = 562181.7

If order quantity is, Q = 300 or more 5% discount

New Total Cost = Total Annual Ordering Cost+ Total Annual Holding/Carrying Cost+ Total cost of goods sold

= Order Frequency*Order Cost+ Average inventory*Carrying Cost+ D*Cost price

= (D/Q)*S+(Q/2)*H+D*Cost price

= (1400/300)*25+(300/2)*68+1400*400

=570316.7